Other Questions - Pension Provisions

Tuesday, 11 October 2011

Dáil Éireann Debate
Vol. 743 No. 1

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  52.  Deputy Seán Crowe  Information on Sean Crowe  Zoom on Sean Crowe   asked the Minister for Public Expenditure and Reform  Information on Brendan Howlin  Zoom on Brendan Howlin   his views on the Association of Secondary Teachers of Ireland, Irish National Teachers Organisation and Teachers Union of Ireland's assertion that the proposed Public Service Pensions (Single Scheme) and Remuneration Bill will be in some instances less valuable to ordinary teachers than no pension provision whatsoever. [28640/11]

  64.  Deputy Seán Crowe  Information on Sean Crowe  Zoom on Sean Crowe   asked the Minister for Public Expenditure and Reform  Information on Brendan Howlin  Zoom on Brendan Howlin   his views on the Association of Secondary Teachers of Ireland, Irish National Teachers Organisation and Teachers Union of Ireland's assertion that the value of many teachers’ contributions under the proposed Public Service Pensions (Single Scheme) and Remuneration Bill will exceed the value of benefits. [28639/11]

Deputy Brendan Howlin: Information on Brendan Howlin  Zoom on Brendan Howlin  I propose to take Questions Nos. 52 and 64 together.

I do not accept that the value of benefits payable to teachers in the proposed single public service pension scheme will exceed the value of employee contributions nor do I accept that the scheme will in some instances be less valuable to ordinary teachers than no pension provision whatsoever.

It is true that the teacher unions have voiced concerns along the lines indicated in the Deputy’s questions. These concerns are stated by those unions to be substantiated by a report by Trident Consulting entitled “Future Pension Provision” which was commissioned by the ASTI, the INTO and the TUI. In quantifying employee contributions to the single scheme, the Trident report appears to regard the public service pension-related deduction as a pension contribution. That is a really important point and it was one I stressed when I met with the teacher unions. However section 7(2) of the Financial Emergency Measures in the Public Interest Act 2009 makes clear that the pension-related deduction is not a pension contribution. It is reviewable annually and it is not to be considered to be a pension contribution. If it was to be rolled into a permanent pension contribution it would change the basis of pension contributions in the public service generally.

To appreciate how the single scheme will continue to provide valuable pensions to teachers, it is instructive to look at the 2009 report of the Comptroller and Auditor General on public [19]service pensions which estimated the annual pension cost to the State for teachers, that is, primary teachers, post-primary teachers and special needs assistants, to be 22.4% of pay. The new single scheme is expected to reduce that cost by approximately one third, to around 15%. The 15% of pay is what the State contribution will be for future pensions. The employee contribution in the new scheme will be 6.5%. This is comprised of 3% on pensionable pay and 3.5% on net pensionable pay which is equivalent to 4.9% of pensionable pay according to the Comptroller and Auditor General’s report, leaving approximately a 10% employer contribution.

In summary, the arguments put forward by the teachers’ unions do not reflect the true position. It must be pointed out that while pension accrual will be on a career average rather than final salary basis, the new single public service pension scheme will continue to offer defined benefit pensions for teachers and other public servants. It is very hard to find a defined pension scheme anywhere in the public sector now so this is a very valuable commodity.

Deputy Mary Lou McDonald: Information on Mary Lou McDonald  Zoom on Mary Lou McDonald  The Trident report said, as the Minister acknowledged, that members would pay more to the scheme in contributions than they would receive from its benefits. In fact, the report goes on to say that teachers would be better off to opt out of the pension scheme. The Minister said he has spoken with the teachers’ unions. Has he identified for them the flaw in the Trident report and, if so, what was their response? So far as I know the teachers have not accepted the Minister’s analysis that the pension is watertight. They appear to be of the view that Trident got it right.

Deputy Brendan Howlin: Information on Brendan Howlin  Zoom on Brendan Howlin  Figures are figures. If one counts the so-called pension levy which all workers, some of whom who do not have a pension entitlement, are paying as a contribution to one’s pension the sums are different from the actual contribution to one’s pension, which will be 6.5% under the new regime. I have indicated to them from my perspective that I do not regard the so-called pension levy to be a permanent feature. It was introduced under the Financial Emergency Measures in the Public Interest Act to get us through. I do not think the vast majority of teachers would like people to present it as a permanent contribution to their pension ever more. I made that point to people. Obviously they have strong views on that matter and will articulate them publicly. I will not try to put words in their mouth, they can say what they believe. Objectively the new pension was designed to ensure that new entrants joining the public service, once this measure is enacted, would have a pension at the end. While our demographics are changing, the dependency ratio will alter between now and the middle of the century, one of our obligations is to ensure that people will have a good pension. In the case of teachers, they will be one of the groups least affected by the new scheme because they have a relatively flat trajectory on a career average basis. It is people, whom the Deputy has expressed a great interest in, who entered the public service as executive officers and end up as Secretaries General who will have the biggest negative impact on their pensions. Instead of their pension being determined by their final few years at the top of the pile, it will be determined by a career average. I think that is a much fairer system. When I said it was fair, that is what I meant.

Deputy Mary Lou McDonald: Information on Mary Lou McDonald  Zoom on Mary Lou McDonald  The teachers and everyone else know full well that the pension levy is a tax and is not a contribution to pension.

Deputy Brendan Howlin: Information on Brendan Howlin  Zoom on Brendan Howlin  But they will argue——

Deputy Mary Lou McDonald: Information on Mary Lou McDonald  Zoom on Mary Lou McDonald  If Trident is wrong on that basis and if, as the Minister has said, the pension levy is not set in stone can I assume the Minister gave the teachers unions some reassurance or a timeframe as to when the pension levy might end?

[20]Deputy Brendan Howlin: Information on Brendan Howlin  Zoom on Brendan Howlin  It is not for me to make that determination, that is for my colleague, the Minister for Finance. However, I can give the Deputy my views on the matter. If the Deputy is asking when we will be out of the economic mess, I do not know. We have a trajectory to get a balanced budget, a deficit of 3% by 2015. The Government is determined to achieve that and we will achieve it. We have no control over external forces. We can only control what we can control. We are determined to get a balanced budget, to work towards norms in terms of the deficit, to ensure we pay our way and that we get out of the economic programme that our predecessor Government bequeathed us in order that we can make economic decisions in the best interests of the Irish people without being overseen by any external party.


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