Civil servants will pay nothing towards pensions if unions get their way on levy

More than 13,000 civil servants would pay nothing towards their own pensions if unions get their way at new talks.

Unions will demand the pension levy, brought in during the financial crisis, be abolished at negotiations expected to start in May on a deal to succeed the Lansdowne Road Agreement (LRA).

Figures released by the Department of Public Expenditure and Reform reveal that 13,853 long-serving civil servants made no contribution towards their personal pension fund before the levy was brought in.

However, it said they do pay 1.5pc towards a survivors’ scheme that could provide benefits to their families when they die.

Public servants have paid the levy – worth 4.5pc of their pay – since it was introduced during the recession in 2009, on top of their existing contributions. It was reduced under the LRA.

Although most public servants would make a contribution to their pension if the levy was axed, sources said the Government was likely to table proposals to keep it in place to cover the soaring cost of retirement benefits.

A Government source said there was a feeling that private sector workers could not be asked to contribute to a mandatory scheme – being championed by Social Protection Minister Leo Varadkar – while some public servants made little or no contribution.

Chairman of the Irish Congress of Trade Unions’ (Ictu) Public Services Committee Tom Geraghty, who will be a key figure at talks, said although civil servants who were hired before April 6, 1995, did not make an “explicit” contribution, there was an “implicit” one.

He said this was because civil servants who joined after this date got a pay rise when contributions were introduced for them.

Mr Geraghty also noted that a discount of 5pc to wages to take account of the fact they did not make a pension contribution has been used at talks on pay.

He said it would be extremely unfair for the vast bulk of civil servants, who earn around €40,000 and whose pensions are integrated with the State pension, to continue to pay 13.5pc between their contributions and the levy.

But actuary and director of Technical Guidance Tony Gilhawley described the pre-1995 civil servants’ retirement arrangements as a “golden package”.

“In addition, the post-1995 civil servants got a salary increase to compensate them for their pension contribution so it is arguable that these civil servants are not paying anything towards it, similar to their colleagues,” he said.

But he said the pre-1995 civil servants are a small group and the bigger question will be the cost of all public sector pensions. He said a new scheme with lower benefits that was introduced in 2013 would not impact on costs for about 40 years.

He said the Comptroller and Auditor General estimated the cash flow from the pension levy would amount to €132bn between 2009 and 2058.

“So abolishing the pension-related deduction entirely would be giving up about €132bn of funds, which would then fall on taxpayers generally, mainly private sector,” he said. “It’s a very big call to make, on a scale like the bank guarantee.”

A recent submission by employer group Ibec to the Public Service Pay Commission said it was “imperative” that the pension levy should become a permanent fixture.

It argued that while many public service workers make significant contributions if the levy was included, they were modest compared with the benefits. It estimates that the employer contribution is almost 14pc higher than its private sector counterparts.

“Current contributions, inclusive of the pension-related deduction, amount to around 70pc of pension outgoings with the State in effect funding the remainder,” it said, adding that, discounting the pension levy, that figure falls to 29pc and by 2058 those figures will stand at 50pc and 18pc “leaving an unsustainable bill for the State”.

The submission said the most recent estimate dating from 2009 puts the total liability in respect of public service pensions at €98bn, but estimates that changes in market conditions since then mean it may have hit €130bn.
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