New Single Service Pensions Scheme
The Public Service
Pensions (Single Scheme and Other Provisions) Act 2012 was enacted in July 2012. It will facilitate
the introduction of a new Single Pension Scheme for all new entrants to the
public service. This includes the civil service, education
sector, health sector, local authorities, Gardai, Defence Forces, regulatory
sector and non-commercial semi state bodies. It also includes Oireachtas
members and the Judiciary.
Service-based accrual of pension will be
discontinued. Instead, members accumulate money amounts towards their pensions
– this will be a theoretical sum calculated annually as a fixed percentage of
pay and up-rated each year by reference to the CPI. These amounts will
accumulate over the span of a career to produce the pension on retirement.
Key Feature of New Schemes:
·
The minimum public service pension age has been raised. This is being
increased initially to 66 to bring it into line with the social welfare state
pension age and it will then rise on a phased basis to 67 and 68.
·
The maximum retirement age of the scheme is set at 70, although the
Government has power to vary this by order.
·
For new entrants the calculation of pensions is on the basis of “career
average” earnings – this is a change from the current position where the
pension is based on “final salary”. The commencement of this provision requires
a Ministerial Order.
·
The overall rate of pension contributions from staff is altered – for
many the contributions will remain broadly as applies at present (approximately
6.5%), but will be higher for certain occupations.
·
The scheme modifies the earnings-linking of pensions – the new scheme
provides for post-retirement pension increases to be linked to consumer prices
not pay.
·
The scheme reduces, but does not eliminate, fast accrual terms – these
generally apply to emergency services groups such as the Gardai, members of the
Permanent Defences Force and Firefighters (as well as office-holders, the
Judiciary and Oireachtas members). The uniformed services will retain their
early retirement age which reflects operational needs.
·
For the President, Oireachtas members, the Judiciary and the Attorney
General and others who earn accelerated pension benefits at present, the new
scheme acknowledges their special circumstances by providing for a doubled rate
of accrual together with a doubled rate of contribution (13%) for all new
entrants to these offices. It is proposed that the President continues to
receive a pension on retirement from the office. Anyone who is or was an
Oireachtas member prior to the enactment of the Act retains those benefits and
scheme membership if there is a break in their Oireachtas tenure.
Given the current moratorium on recruitment on
the public sector, it will be some time before the above changes kick in.
However, there is plenty to consider when advising the next generation of
public sector workers in years to come.
