Public pension increases to be based on cost of living

Tens of thousands of public service workers could have their pensions overhauled and only receive increases based on the cost of living rather than any future pay rises.

Public Expenditure Minister Brendan Howlin has admitted he could tackle pre-existing public pensions once the Croke Park agreement concludes.

An enabling brief clause in the public service pensions bill allows the minister to make changes to some or all pre-existing public service pension schemes.

Until now, many observers of the current legislation thought changes only applied to future public service workers.

Another key part of the changes mean the calculation of pensions based on ‘final salary’ will end and ‘career averaging’ will be introduced for new pension schemes.

Some public service staff argue the current method of linking pension rises to pay increases for serving staff has been more beneficial than if they were linked to inflation rates.

Mr Howlin’s department estimates that over the past 20 years, pension rises for retirees — linked to public service earnings — were twice what they would have been if they were linked to consumer prices.

Mr Howlin recently told the Select Oireachtas Committee on Public Expenditure that the option in the legislation of applying those changes to existing pension schemes and serving staff was “a useful device to consider for the future”.

“If we believe in the fairness of consumer price indexing, then we need to reflect on why it would not be applied to current pensioners in the future,” he said.

The current agreement between departments and trade unions prevents any radical changes to pay and pension schemes.

Mr Howlin has signalled he could introduce the retrospective clause on existing pension schemes after 2014, once the Croke Park deal ends.