The Government has published details of a new pension scheme for public servants aimed at cutting €1.8 billion a year from the State pension bill by the middle of the century.

Under the new scheme, future new entrants will have their pension calculated on a career average basis, rather than on the basis of the final salary at the time of retirement.

Pensions will be linked to the Consumer Price Index, rather than to the pay of the grade which the retiree has left - the so-called "pay parity" system.

In addition, a maximum retirement age of 70 will be put in place - and the pensionable age will be increased to 68 in line with welfare rules.

The new rules will hit higher earners more than those on lower salaries.

The Department of Finance has calculated that if the current system were unchanged, the State pension bill by the middle of the century would be around €5bn.

The new system will shave €1.8bn per year from that bill.

Among those who will be worst hit by the pension reforms are future Presidents, Members of the Oireachtas, judges and top office holders.

All new entrants will also be liable to the 10% pay cut announced in a previous budget.

As with all public servants, after February pension entitlements will be based on salaries after pay cuts - but top office holders will also be paying higher contributions.

Future presidents will go from paying no pension contribution at all to paying 13% of their salary.

Members of the Oireachtas will go from paying 6.5% to a contribution of 13% and the future attorney general will also pay 13%.

Those who join the judiciary after the reforms are implemented will also be liable for a pension contribution of 13%. Current judges only pay 4% for a spouse and child benefit.

The salary of judges will be the subject of a referendum on 27 October.

ASTI considering legal action

The ASTI has said it is considering a legal challenge to the Government's new pension scheme.

Secretary General Pat King said the bill means teachers will be forced to join a pension scheme which will see them paying more in contributions than they will receive in benefit.

"A teacher entering the new pension scheme at the beginning of their career would pay more into their pension than they would ever get out. This means the compulsory scheme may well be open to legal challenge."

The Minister for Public Expenditure and Reform described as "extraordinary" claims that the changes to the public service could result in some teachers leaving service at retirement with less than they had put in.

Brendan Howlin said he was not sure where the ASTI had got its calculations from, but said he would be happy to meet with the union's general secretary to examine them.

He insisted the new scheme would be fairer and more balanced than the current system.

Mr Howlin said the proposed career averaging system would not significantly change entitlements for those on lower salaries.

However, the real change would be for those with significant progression through their careers in the public service.

He said that the new measures would only apply to new entrants becuase the Government cannot retrospectively legally change entitlements built up over 20 - 30 years.

Mr Howlin said the new measures were required in light of the changing dependency ratio and demographic trends to ensure that there would be a robust pension available to everyone in the public service in future.