Proposals on public pension reform

THE Labour Relations Commission has published its proposals on how to operate the new “career-average” pension scheme for future entrants to the public service.

In the last budget, Finance Minister Brian Lenihan announced a new single pension scheme which would apply to all new entrants to the public service from January 2011.

At that point, it said it wanted a scheme which would:

* Bring public service pension terms more into line with those which apply in the private sector.

* Link pension benefits more closely to career earnings.

* Improve the efficiency of pension administration within the public service.

* Manage the growth of public expenditure on public service pensions over the longer term.

In that regard, it said the scheme would require a new minimum pension age of 66 and a maximum retirement age of 70 and crucially, it would have benefits based on a “career average” earning rather than the final salary.

The LRC was asked to act as mediator in the talks between public service unions and the Department of Finance and to then formulate a set of proposals.

In its resulting document, LRC director of conciliation services, Kevin Foley, and Maedhbh Cronin, industrial relations officer, make a number of suggestions.

They said the scheme should apply to all areas of the public service, including the civil service, education sector, health sector, local authorities, Gardaí, Defence Forces, other regulatory or similar bodies and non-commercial state bodies.

It will also include the President, Oireachtas members and the judiciary.

“The Commission recommends that the formula using three-and-a-third times the contributing state pension (ie €40,057) be adjusted by increasing this to €45,000 and an appropriate adjustment in the accrual rate be made,” they said. “On this basis a new-entrant public servant will, under the career average system ‘earn’ a pension amount and a separate lump-sum amount each year as they progress through their career based on their pensionable pay at that time.

“The accrued amounts will be indexed to the Consumer Price Index (CPI). The accrued and indexed amounts will then be aggregated to produce the pension and lump sum on retirement.”

The commission also recommended that there be no reduction in the accumulated pension balance if CPI is negative and in addition that there should be no offset or “mark time” in respect of negative inflation when positive inflation resumes.

According to Industrial Relations News, which secured the LRC proposals, while the unions have not formally signalled their support for the recommendation, IRN understands there is a view that the document is the best that can be achieved.

Over the coming weeks, the two sides are expected to give their consideration to the proposals.