Annual pay bill will fall €3.3 billion after allowing for extra pension costs

Updated Wednesday 13th June 2012

By 2015, the total annual cost of public service pay and pensions will have fallen by approximately €3.3 billion (or almost 19%) from its 2009 peak if the Croke Park agreement remains in place, according to figures provided to the Croke Park implementation body by the Department of Public Expenditure and Reform.

The figures, outlined in the implementation body’s second annual report today, 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. (See table 3 below, which is taken from the implementation body’s report).

The pension bill will increase from almost €2.6 billion to just under €3.1 billion over the same period; an increase of €0.5 billion. (See table 4 below, which is taken from the implementation body’s report).

That means the exchequer will save €3.3 billion a year, after allowing for its additional pension commitments.

The implementation body report also points out that the expected increase in pension costs is not due to Croke Park measures. 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.

The report says: “The relationship between movements in the pay bill and the pensions bill is not a direct one.” Changes in the pension bill between 2009 and 2015 will result from factors like increased survival rates of existing pensioners and the demographic profile of the public service, which sees increasing numbers approaching retirement now because of substantial public service recruitment in the 1970s.

Table 3: Exchequer Pay Bill costs 2009 to 20151

2009 2010 2011 2012 2013 2014 2015 2009-2015 reduction net of PRD
€m €m €m €m €m €m €m
Exchequer Pay Bill – Gross 17,514 15,935 15,645 15,375 15,000 14,700 14,600
Pension Related Deduction (PRD) 837 945 950 930 916 911 911
Exchequer Pay Bill Net of PRD 16,677 14,990 14,695 14,445 14,084 13,789 13,689 3,825
Note: Figures provided by the Department of Public Expenditure and Reform

Table 4: Exchequer Pension Bill costs 2009 to 2015

2009 2010 2011 2012 2013 2014 2015 2009-2015
€m €m €m €m €m €m €m
Exchequer Pension Bill – Gross 2,558 2,733 2,753 3,038 2,979 3,099 3,099
Increase over previous year 175 20 285 -59 120 0 541
Note: Figures provided by the Department of Public Expenditure and Reform
12009 has been used as the base year due to the fact that while public service numbers peaked in 2008 (see Table 1), the gross Public Service pay bill did not peak until 2009 due to the full year effect of the last general round of pay increases under the Towards 2016 national pay agreement. Accordingly, the forecast reduction in pay bill from 2009 to 2015 is €3.8 billion while the equivalent reduction from 2008 to 2015 is €3.5 billion.