An end to pension increases for retired public-sector workers is on the table in the next round of pay talks.
Public-service pensioners have traditionally benefited from pay parity, which means they go up when there is an increase in the salary of the person in their old job.
The Government would save billions by breaking the link between public-sector pension increases and State worker pay hikes. If the measure is enacted, their pensions would increase only in line with inflation.
Government sources have revealed that stopping public-sector pensions rising when State workers get wage increases will now be on the table in talks with unions next year. This would slash the pensions bill by €16bn over 70 years.
Public Expenditure Minister Paschal Donohoe has legislation on the books that would stop State workers' pensions rising when someone in the grade from which they retired gets a pay rise.
Now that pay rises are firmly back on the agenda following years of cuts, Mr Donohoe is expected to give the cost-cutting measure fresh consideration.
Wage increases worth €290m are already due under the Lansdowne Road Agreement (LRA) next year, with payments to those earning over €65,000 due in April, followed by a €1,000 pay rise for those earning less than this in September.
Unions will also demand further pay rises at talks due to take place in the summer on a deal to succeed the LRA.
A total of €1.4bn cut from wages under emergency legislation has not been refunded.
The Public Expenditure Department said the issue of pension increases would be examined as its pay and pension strategy stabilised.
"As we move beyond FEMPI (Financial Emergency Measures in the Public Interest) pay and pension measures, including PSPR (public service pension reduction), towards more normal pay and pension setting conditions in the public service, the issue of how to adjust the post-award value of public service pensions through appropriate pay or other linkages will be considered by Government," said a spokesperson.
Cuts to public service pensions imposed during the financial crisis are being partially reversed in three stages up to 2018. When fully rolled-out from January 1, 2018, the changes will mean all public service pensions worth up to €34,132 will be exempt from the cuts.
"Given that pensions were being reduced by the application of PSPR, the issue of public service pension increases did not arise," the spokesperson said.
Negotiations
The department spokesperson said talks with unions due to begin next year would be informed by the Public Service Pay Commission's first report, which would examine the unwinding of FEMPI legislation.
"Anything deemed to be relevant will form part of those negotiations," she said.
The issue of linking pay with inflation was high on Government officials' agenda in briefing documents prepared for Mr Donohoe when he took up his portfolio.
In an interview with the Irish Independent, Mr Donohoe said future negotiations had to take account of the value of public pensions.
"The reasons for that is that my expectation that the difference between public and private pensions has now widened in recent years," he said.
"I'm only going to have those discussions on the basis of evidence because it's a very, very difficult subject. That's why I want the Public Sector Pay Commission to do their work."
The Public Service Pensions (Single Scheme and Other provisions) Act 2012 provides for a potential replacement of pay parity increases for public service pensions with CPI increases.
The link between pensions and inflation already exists for public servants hired since 2013. But the legislation also contains a mechanism that would allow a similar link for all other civil and public service pensions.
In response to a parliamentary question in 2015, former minister for public expenditure and reform Brendan Howlin said the value of all expected future superannuation payments to current staff and their spouses was estimated at €98bn up to 2012. He said the pension payments to discharge this liability were spread over the next 70 years or so.
Mr Howlin noted that the 2012 Public Service Pensions Act allowed the Public Expenditure minister to link future pension increases with the consumer price index.
"Were this to be done, the accrued liability would reduce by a further €16bn to €82bn," he said. The value of pensions and job security will be central to talks between unions and the Government when it comes to the crucial issue of pay rises.
Irish Independent
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