Sir, - Now that the shadow boxing is over the Government has agreed to pay pension increases of between 13 and 20 per cent to retired nurses, gardai, teachers, civil servants and local authority officials as well as TDs at a cost of £23 million a year, bringing bring the total cost of those pensions to over £600 million a year. This is in addition to the £200 million paid to Telecom Eireann to fund the pensions of former civil servants transferred to it and a similar payment to An Post.
It is not surprising that the Minister for Finance said that he was worried (The Irish Times, November 5th). The so-called principle of "parity", whereby pensions are increased in line with increases in the current rate paid to the jobholder, was introduced during the Haughey administration in the late 1970s. The ESB statutory pension scheme also includes a parity factor which resulted in huge cash injections to maintain its viability.
This is an open-ended, uncontrollable method of financing pension costs. The Commission on Public Service Pensions may say that it is not worried by the prospect of the "pensions time bomb" but the Minister, along with many others, have expressed their doubts. The economy's rising prosperity curve conceals the financial difficulties the present pension arrangements will create for future governments.
There is already evidence of the existence of two of the three indicators that tell of financial trouble ahead for State-sector employees' retirement costs: an ageing population with increased dependency, and a falling birthrate. The third indicator, a no-growth economy with rising taxes and rising unemployment, is, fortunately, not a problem in our present booming economy. But booms taper off in time and it would be folly to postpone necessary action at this time because we happen to be "ar muin na muice".
No commercial organisation could sustain the cost of a pay-asyou-go pension scheme of this kind. Public service employees should have a modern contributory pension scheme with defined contribution rates and defined benefits on retirement, with provision for upward adjustment in line with the Consumer Price Index. The funds themselves should be independently managed. Only by such means can sanity be restored to public service pensions in the long term.
A start should be made now by, first of all, putting such a scheme in place and, secondly, by making it a condition of employment for new entrants to public service employment that they join. - Yours, etc., Christopher Martin,
Howth Road,
Dublin 3.