Break the link with public sector pensions

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Break the link with public sector pensions

Thursday, June 5, 2014 - 13:00

(reproduced courtesy of The Irish Times)

It seems the Government could shave up to €16 billion from the public sector pension bill if it was to break the automatic link between pensions and public sector pay rises, according to a study by the Department of Public Expenditure and reform.

It’s an eye-catching figure, although the Department admits it will take 70 years to see the full impact of the change, which works out at a less impressive €229 million a year.

Public sector pension increases should be linked to inflation instead of pay rises, as is the norm with the better private pension schemes, the Department argues.

Not only that, the time to make the change is upon us, because it could be slipped through as part of the process of unwinding all the emergency legislation introduced in recent years. Indeed, the legislation to implement the change exists and all that is required is a resolution passed by the Dáil.

Easier said than done, one suspects, given the number of current and retired public sector employees and their penchant for actually going out and voting.

There is, however, one rather puzzling aspect of the Department’s calculations and it is the assumption, implicit in the analysis, that public sector pay will rise by more than inflation for the next 70 years.

Not only that, one has to assume it will rise by substantially more than inflation in order to result in an increase in pension liabilities of €16 billion.

There is no explanation for why public pay rises should be expected to outstrip inflation for the foreseeable future. Perhaps it is simply a reflection of past realities such as benchmarking.

But one wonders if the energies of the Department of Public Expenditure and Reform’s uber-ambitious secretary general Robert Watt might not be better expended in linking public sector pay rises to inflation in the next few years rather than floating an idea that would require a large number of Dáil deputies to try to vote themselves out of a job.

 

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