The Minister for Public Expenditure and Reform, Michael McGrath, T.D. today [Tuesday 15th December 2020] briefed Government on the findings of an Actuarial Review of the State’s Accrued Liability in respect of Public Service Occupational Pensions in Ireland. This process occurs every 3 years as required under EU rules.
The value of the State’s Accrued Liability in respect of retirement benefits for current and former public service employees is estimated as €149.6bn as at 31st December 2018. This figure represents the value in “today’s money” terms of all expected future superannuation benefit payments arising from accrued service to 31st December 2018.
Over 70% of the increase in the reported obligation from the last review can be attributed to a technical revaluation of the obligations due to a change in prescribed assumptions by Eurostat. The accrual of additional benefits by current employees, including new staff, also increases the accrued liability.
The Minister speaking today stated that “The significance of the public service to the overall well-being of the country has never been more evident than during the past 10 months as we have witnessed the resourcefulness of staff at all levels in playing their essential part in combatting the impact of Covid-19.
Pension benefits are an important part of the remuneration of public servants and the overall process of the recruitment and retention of staff. It is imperative that we have a clear picture of the value of these benefits and that is provided by this report which covers the future entitlements of employees across vital areas such the Health and Education sectors, the Garda Síochána, Civil Service, Defence Forces, Local Authorities and Non-Commercial State Sponsored Bodies.
While the overall figure is undoubtedly large, it is important to bear in mind that the accrued liability will be paid over the next 70 years or so. It is also important to highlight that a number of significant steps have been taken to improve the long-term sustainability of public service pensions including the Single Public Service Pension Scheme introduced for new entrants from 2013.
Current public sector employees make a significant contribution to funding the overall cost of benefits provided amounting to €1.4 billion in 2019 including the Additional Superannuation Contribution by public servants introduced under the Public Service Pay and Pensions Act 2017.
In addition, there has been an increase in the compulsory retirement age from 65 to 70 for public servants recruited before 1st April 2004. This will also assist in reducing the time period over which pension payments will be paid to those public service employees who opt to remain in work longer.”
The cost of public service occupational pensions is expected to increase from 1.1% of GDP in 2019 to 1.5% of GDP by 2040. However, the cost is expected to reduce thereafter with a cost of 0.9% of GDP expected by 2060 reflecting measures taken to mitigate costs.