Annual pay bill to fall €3.3 billion net of pension costs

Thursday 19th April 2012

By 2015, the total annual cost of public service pay and pensions will have fallen by €3.3 billion (or almost 19%) from its 2009 peak, according to figures provided by the Department of Public Expenditure and Reform. The figures, which were given to the Oireachtas Public Accounts Committee by the Chair of the Croke Park National Implementation Body on 12th April, take account of pay cuts, the pension levy, reductions in pension payments, and savings delivered through staff reductions and reforms under the Croke Park agreement.

The gross pay bill, which peaked at €17.5 billion in 2009, is expected to fall to €13.7 billion in 2015; a reduction of €3.8 billion. The pension bill will increase from €2.6 billion to €3.1 billion over the same period; an increase of €0.5 billion. That means the net saving to the exchequer will be €3.3 billion a year.

In a letter to the PAC, Croke Park National Implementation Body chair PJ Fitzpatrick also pointed out that the increase in pension costs was not due to Croke Park measures. In fact, there have been virtually no enhanced pensions under the agreement and the vast majority of early retirements have been cost neutral, with pension payments reduced to reflect any reduction in service.   He pointed out that changes in the pension bill between 2009 and 2015 were the result of:

  • Increasing survival rates of existing pensioners
  • An increase in the numbers of public service retirements in this decade because of an expansion in public sector employment in the 1970s
  • The 4% reduction in pension payments for those who retired before February 2012
  • Reduced pension payments for those who retire after February 2012, whose pensions are based on reduced pay scales
  • The once-off costs of retirement lump sums. 

Mr Fitzpatrick was providing further information after appearing before the PAC on 22nd March when, among other things, he was quizzed on the relation between pay and pension costs. His response deals with the flawed arguments of those commentators who suggest all or most savings in the public service pay bill are offset by increased pension costs.

Mr Fitzpatrick’s letter also gave clarifications on the cost of increments and the implementation of changes in annual leave and ‘privilege days’ which have been covered in previous IMPACT Croke Park Updates.