Press release
Minister Donohoe publishes Actuarial Review of Public Service Pension Liabilities
From Department of Public Expenditure, NDP Delivery and Reform
Published on
Last updated on
From Department of Public Expenditure, NDP Delivery and Reform
Published on
Last updated on
The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD today (19 December 2017) briefed Government on the findings of an actuarial review of the State’s accrued liability in respect of public service occupational pensions in Ireland.
The value of the State’s accrued liability in respect of retirement benefits for current and former public service employees is estimated to be €114.5 billion as at 31 December 2015. This figure represents the present value of all expected future superannuation benefit payments arising from accrued service to 31 December 2015.
The €114.5 billion figure was calculated under the assumption that future pension increases will continue to be in line with pay parity, as has been the case historically.
The value of the accrued liability was also estimated with the assumption that pensions in payment will increase in line with the Consumer Price Index (CPI). In this scenario, the accrued liability figure falls to €97.2 billion as at 31 December 2015.
The Minister, speaking today indicated that:
“While this is a large figure, it is important to bear in mind that the accrued liability will fall to be paid over the next 70 years or so – 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.
“For example, the Single Public Service Pension Scheme introduced from 2013 will, in time, reduce liabilities by around 35% from what would otherwise have been the case. Under the Public Service Pay and Pensions Bill (Act) 2017 we are making provision for the introduction of an Additional Superannuation Contribution by public servants.
“This will increase current employee pension contributions from over €700 million per annum to €1.25 billion in 2019, thus providing substantial additional ongoing funding support towards the cost of public service pensions from those that benefit from such pensions.
“Furthermore, I recently announced 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 1.2% of GDP in 2016 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.
The reductions in projected public service occupational pension expenditure over the long term arise largely as a result of the integration of public service pensions with the State Pension Contributory for employees who joined the public service after 6th April 1995, the subsequent increase in the minimum retirement age for new entrants from 2004, as well as the introduction of the Single Public Service Pension Scheme as noted above.
The report can be accessed here.
ENDS
The accrued liability valuation was carried out on behalf of the Central Statistics Office, who are required to compile a supplementary table showing the accrued liability of all funded and unfunded Irish pension scheme as part of the National Accounts, under EU regulation 549 / 2013 .
The supplementary table on pension schemes was introduced as a requirement for all EU countries to allow for improved analysis and international comparability of existing pension systems within and between countries, under the System of National Accounts SNA, 2008 and European System of Accounts ESA,2010 .
The methodology and assumptions used for the valuation follow those recommended by Eurostat and the European Central Bank. The assumptions adopted broadly coincide with those produced by the European Commission for the Ageing Report 2018 , with the exception of the mortality assumptions. The mortality tables used reflect the mortality experience of pensioners of occupational pension schemes in Ireland.
The increase in the State’s liability from 2012 to 2015 can be largely attributed to the natural ageing of current and former employees. Importantly, benefit terms for public service employees have not been improved over the period.