Why are so many public servants retiring at the moment?
When the Government cut public sector pay in the 2010 budget it softened the blow by promising the pension and lump sum entitlements of any public servants who retired before a specific date would be based on their pre-pay cut salary.
The date for the end of this “grace period” was changed several times but eventually fixed for February 29th, 2012. The attraction of higher pensions and lump sums is prompting many public servants to leave now rather than in a few years’ time.
So how many are leaving?
By yesterday, which was the last day for receiving applications, more than 7,700 public servants had applied to leave. That number includes 2,000 in the education sector, 1,000 in the Civil Service, almost 300 gardaí and 3,500 in the health sector.
Can they change their minds? Yes. People who applied to leave under the scheme are allowed to withdraw their applications right up to the deadline at the end of February. It is possible that the overall number of departures will be lower than the current level of applications would indicate.
Can retirees stay on after February?
No. An exception has been made for teachers with exam classes so they can see out the academic year if they want to, but they will be paid at the bottom of the scale.
How much will the average public servant benefit by leaving now?
The key factors are a person’s salary on retirement and length of service. In the case of public servants with full pension entitlement thanks to 40 years’ service, the balance of financial advantage lies with leaving now – but for staff with shorter service the issue is more complex.
Give me a specific example?
A public servant retiring now after 34 years’ service on a salary of €65,000 would have her pension calculated on the basis of her pre-pay cut salary of almost €70,000. That would yield a pension of €28,332 and a lump sum of €88,655. If she were to retire next August 31st, her pension would be €28,031 and her lump sum €84,093.
However, during that time she would have earned a further six months’ gross salary of €32,500 rather than a gross pension of €14,166.
The departure of so many staff at the same time is going to cause problems in schools and hospitals. How will the gaps be plugged?
The Government plans to deal with any staff shortages through deployment and “limited targeted” recruitment. The aim is to cut overall public sector numbers by 6,000 this year, so if more staff leave there will be scope for recruitment.
How much is this scheme going to cost the taxpayer?
We don’t know. The cost will depend ultimately on how many leave, what their final salaries are and what length of service they have. The State will save by having fewer salaries to pay – 6,000 net is the aim. At the same time, it’s paying out more in lump sums – €600 million this year – and pensions, and forgoing pension levy payments.
The Health Service Executive, for example, has estimated the net saving is just one-third of the gross cost.
