IRELAND 21 May 2013
Special Report 68: Central Government Pensions
Press Release: Special Report on Public Service Pensions
The Comptroller and Auditor General, Mr John Buckley, has today published a report of an examination of public service pensions.
The examination covered pension schemes of civil servants as well as public servants in the Health Sector, the Education Sector, the Garda Síochána, the Defence Forces, the Prison Service and in non-commercial State Sponsored Bodies. The schemes reviewed cover over 300,000 staff and more than 100,000 existing pensioners, and their dependants.
Pension consultants were engaged to estimate the cost of superannuation benefits including accrued pension liabilities for serving public service staff and pensioners, and their dependants, and the cash flow projections associated with pensions over the next 50 years.
The examination also looked at the administrative, funding and accounting arrangements for pensions of public servants.
Cost of Public Service Pensions
The State’s accrued liability in respect of pensions for serving staff, pensioners and preserved pensioners was estimated at €108 billion at 31 December 2008.
The pension payments to discharge those liabilities will be spread over the next 60 years or more.
Taking a 50 year horizon, gross outflows between 2009 to 2058 will amount to €367 billion at 2008 prices. However, after taking account of inflows in the form of standard pension contributions and the recently introduced pensions related deduction the net outflow is estimated at €157 billion over the same period.
The pension burden is set to rise significantly over the next 50 years. Currently, net public service pension payments absorb 0.5% of GNP and as a result of demographic changes it will be necessary to devote 1.8% of GNP to meet the net cost of pension payments by 2058.
Overall, the examination found, based on the cost of one year’s additional service, that the pension provision for an average public servant will cost around 9% of pay after account is taken of contributions made and the pension related deduction. The gross cost is on average 20% of pay. There are wide variations by sector as full pensions can be earned over a relatively shorter working life in certain sectors.
Accounting for Pensions
The examination noted that the wider introduction of an accruals basis of accounting for pensions would bring greater cost transparency and make explicit the true financial impact of resourcing decisions. In addition, it recommended that actuarial reviews and projections of public service pension outflows should be carried out on a regular basis to ensure that the State is aware of the cost impact of pensions and the timing of pension outflows.
A summary of the findings and the full text of the report is available on the website of the Office of the Comptroller and Auditor General (go to www.gov.ie/audgen/)
Notes for Editors
The Comptroller and Auditor General is an independent constitutional officer with responsibility for the audit of public funds. He reports to Dáil Éireann.
For further information about the report, please contact:
Richard Rapple at (01) 603 1038 or at Richard_Rapple@audgen.irlgov.ie