The State’s bill for its 298,000 serving public servants, and a further 155,000 who have already retired, now stands at €114.5 billion.
The figure, contained in the Department of Public Expenditure’s latest actuarial review of its pension liability in respect of public service workers, represents the value at the end of 2015 of all expected future payments to current and former staff.
The figure has jumped 17 per cent from €98 billion in just three years since the last actuarial study for the department. The rise is down to additional benefits that have accrued in the intervening time and the partial reversal of public sector pay cuts imposed during the financial crisis.
The updated figure was calculated on the assumption that future pension increases would continue to be in line with pay rates rather than consumer prices, a move that would greatly reduce the burden on the State.
To date, public service unions have resisted any move to link their pensions to inflation, which is the norm for private sector pensions. rather than the pay rates of the grade from which they retire.
If the State’s liability was measured on the basis of pension increases being tied to consumer prices, the end-2015 figure for overall liabilities figure falls to €97.2 billion
The guaranteed defined benefit pension schemes afforded public sector retirees currently cost the exchequer €3.3-€3.5 billion a year, and deliver significantly better incomes than most private sector retirement plans.
While the drain on the exchequer is considerable, Minister for Finance and Public Expenditure Paschal Donohoe noted that the accrued liability would be spread over the next 70 years, and would not fall due not in any single year.
“It is also important to stress that we have taken a number of significant steps to improve the long-term sustainability of public service pensions in recent times,” he said, noting the single public service pension scheme introduced from 2013 will, in time, reduce liabilities by around 35 per cent from what would otherwise have been the case.
The cost of public service occupational pensions is expected to increase from 1.2 per cent of gross domestic product (GDP) in 2016 to 1.5 per cent of GDP by 2040. However, the report suggests the cost of paying public sector pensions will then fall to 0.9 per cent of GDP by 2060.
The authors of the review did not consider the sustainability of public service occupational pensions, which is an ongoing bone of contention with private sector taxpayers. Assessing sustainability is not a requirement of the EU regulation, which specifies member states must calculate their public sector pension liability every three years.
