Public Sector Pension Changes

New Single Service Pensions Scheme

The Public Service Pensions (Single Scheme and Other Provisions) Act 2012 was enacted in July 2012. It will facilitate the introduction of a new Single Pension Scheme for all new entrants to the public service.  This includes the civil service, education sector, health sector, local authorities, Gardai, Defence Forces, regulatory sector and non-commercial semi state bodies. It also includes Oireachtas members and the Judiciary.

Service-based accrual of pension will be discontinued. Instead, members accumulate money amounts towards their pensions – this will be a theoretical sum calculated annually as a fixed percentage of pay and up-rated each year by reference to the CPI. These amounts will accumulate over the span of a career to produce the pension on retirement.
Key Feature of New Schemes:

  • The minimum public service pension age has been raised. This is being increased initially to 66 to bring it into line with the social welfare state pension age and it will then rise on a phased basis to 67 and 68.
  • The maximum retirement age of the scheme is set at 70, although the Government has power to vary this by order.
  • For new entrants the calculation of pensions is on the basis of “career average” earnings – this is a change from the current position where the pension is based on “final salary”. The commencement of this provision requires a Ministerial Order.
  • The overall rate of pension contributions from staff is altered – for many the contributions will remain broadly as applies at present (approximately 6.5%), but will be higher for certain occupations.
  • The scheme modifies the earnings-linking of pensions – the new scheme provides for post-retirement pension increases to be linked to consumer prices not pay.
  • The scheme reduces, but does not eliminate, fast accrual terms – these generally apply to emergency services groups such as the Gardai, members of the Permanent Defences Force and Firefighters (as well as office-holders, the Judiciary and Oireachtas members). The uniformed services will retain their early retirement age which reflects operational needs.
  • For the President, Oireachtas members, the Judiciary and the Attorney General and others who earn accelerated pension benefits at present, the new scheme acknowledges their special circumstances by providing for a doubled rate of accrual together with a doubled rate of contribution (13%) for all new entrants to these offices. It is proposed that the President continues to receive a pension on retirement from the office. Anyone who is or was an Oireachtas member prior to the enactment of the Act retains those benefits and scheme membership if there is a break in their Oireachtas tenure.

Given the current moratorium on recruitment on the public sector, it will be some time before the above changes kick in. However, there is plenty to consider when advising the next generation of public sector workers in years to come.
Written by Paul Gilmer.


*Please note this content is the view of the author and not of Independent Trustee Company

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