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Almost half of private sector workers will be fully dependent on State pension, conference hears

The conference heard it would be harder to fund pensions because a lots of younger workers had emigrated
The conference heard it would be harder to fund pensions because a lots of younger workers had emigrated

Over 8% of government employees are now covered by a less generous pension scheme than their longer-serving colleagues, according to the Department of Public Expenditure and Reform.

The details emerged at a conference on pensions organised by the Institute of Public Administration today.

Up to 2012, around 300,000 public servants belonged to a defined benefit or final salary scheme.

Upon retirement, that would deliver an annual pension of up to half their final salary, plus a tax free lump sum of one-and-a-half times that final salary.

However, the scheme was deemed unaffordable and unsustainable in the long term.

In early 2013, the Government instituted a cheaper public service pension scheme for new entrants called the Single Scheme.

The new scheme calculates pension entitlements based on average earnings throughout a career, rather than on the basis of the final salary.

Known as a career averaging scheme, the Single Scheme is set to reduce some pension entitlements - particularly for higher paid workers - compared to the old final salary scheme.

Addressing today's conference, Henry O'Mara of the Pensions Division of the Department of Public Expenditure and Reform said that the current membership of the new scheme stands at around 25,000 working for around 400 different public service employers.

This reflects recent hiring particularly of frontline medical and educational personnel - and will rise further as the recruitment embargo is eased.

It is estimated the 25,000 new entrants will contribute approximately €45m to the new fund this year.

Earlier financial commentator Jill Kerby told the conference that public service pension reforms had not gone far enough.

She called for a mandatory, single sustainable pension system for all with reasonable funding and income limits, which could have the added advantage of driving down fund management fees and charges.

She noted that of the workforce of 1.94 million workers, almost half of all private sector workers will be fully dependent on the State pension which currently stands at around €12,000.

Ms Kerby also noted that it would be harder to fund pensions because a significant number of younger workers had emigrated during the economic crisis.

She described the Government levy on private sector pension funds as a blunt instrument which had stolen money from funds - which could now never be compounded to deliver retirement income.

She called for an incentive scheme such as the Special Saving Incentive Account to encourage people to invest in pensions.

IMPACT General Secretary Shay Cody said one job of unions was to extract as high a contribution as possible from employers towards their employees' pensions.

He said by and large pension coverage was absent in large swathes where unions were also absent.

He voiced strong criticism of the current regulatory arrangements which he said artificially overvalued liabilities.

M Cody noted that the estimated state liability for public sector pensions had fallen from €116 billion in 2009 to €82 billion - partly due to pay cuts resulting in lower pension entitlements.

He also noted that public servants contributed to funding their pensions - from 3% for those earning less than €24,000, to 17% for those on over €60,000, which he described as draconian.

He told the conference that 78% of public servants are on pensions of less than €30,000.