Croke Park Retirement Panic
Wednesday 1st February 2012
There’s been a hint of panic in recent media coverage of expected retirements from the public service at the end of this month, with lurid reports of the possible effect on services and costs to the exchequer. Thankfully, most media coverage has been based on assumptions and misinterpretations rather than facts.
It is certainly the case that thousands of public servants are expected to retire by 29th February, which is the last day on which they can go with pensions based on their pre-pay cut salaries.
There is no ‘early retirement scheme’ and no facility for public servants to get ‘extra’ lump sums or pensions by retiring now. It’s just that a relatively small number of public servants, who are at or near retirement, can opt for a slightly smaller reduction in their pension if they retire now.
Everyone who retires before the end of the month will be subject to the average 4% cut in public service pensions introduced last year. Those who retire early will have their pension further reduced, on an actuarial basis, to reflect their reduced years of work and pension contributions and any earlier payment of pension. The actuarial reduction can be as much as 5% for every year of early retirement.
The fact that pensions are being adjusted down for early retirees means that only those already at, or very close to, retirement age can benefit in any way by leaving next month. A relatively high number will be going at one time. But it’s not an exodus of people who would otherwise have remained in the service for years. Virtually all of them would have been due for retirement over the next year to 18 months anyway.
Both the targeted reduction in public service numbers and the 29th February date have been set by the Government – not negotiated by the unions. Indeed, the teacher unions unsuccessfully sought a deferral until the end of the school year.
Cuts in staffing and spending forced on Ireland since it lost its economic sovereignty are bound to effect services. But, as well as delivering savings, the Croke Park agreement is there to help managers prioritise services and manage the decline in numbers during a time of massively increased demand for services.
IMPACT says the sudden exit of 2,000 health workers at the end of 2010 was rushed and poorly managed – but even this did not lead to major problems with services.
Most accept that costs have to be rapidly brought down to tackle the deficit, and the Croke Park agreement has so far exceeded Government and ‘troika’ targets in this regard. It’s not easy to do, but there is no quick fix alternative.
Some have argued that cutting the pay of the few posts paid above international norms is an alternative to staff reductions. But there are so few public servants in this category – just 2% of public servants earn over €100,000 a year – that even the outright abolition of the posts would not generate enough savings to balance our books or meet our international commitments.
In the meantime, official figures show that 78% of civil service pensioners receive annual pensions of €30,000 or less – and the great majority of them don’t receive the state pension, currently worth almost €12,000 a year or €20,000 with an adult dependent.
The facts about the February retirements
- There is no early retirement ‘scheme’ or enhanced lump sum/pension for leaving by 29th February. Rather, 1st March is the date at which retirees will get pensions based on post-pay cut salaries.
Public servants who are at or near retirement can opt for a slightly smaller reduction in their pension if they retire now.
- Everyone who goes prior to 29th February will incur the public service pension reduction introduced last year.
- Any of them who are retiring early will have their pensions further (actuarially) reduced to reflect their reduced years and contributions and any earlier payment of their pension. The actuarial reduction is as much as 5% for every year of early retirement.
- The latter point means that only those at or very near retirement date can benefit in any way – and the benefit is a reduced cut rather than an enhanced pension or lump sum.
- These people would be retiring in the next year to 18 months anyway – and, in terms of staffing and service issues, the recruitment embargo rules and regulations would apply in that case.
- The Government has been clear that some vacant posts that arise will be filled. This will protect services and represent a significant saving as new staff will be employed at the bottom of pay scales and on reduced salary scales for new entrants (10% below that of existing staff, on top of 2010 pay cut and pension levy). If staff are promoted into vacancies, they will earn the “new entrants” (reduced) pay rates.
- The Croke Park agreement has been effective at managing exits through redeployment and other measurers. Some 20,000 staff have gone in recent years (half the Government target up to 2015). And a large number went in one go at the end of 2010 due to the HSE exits – but this was managed.