Pensions

Pension News Timeline

19/01/11: Important Pension Meeting Tomorrow

13/12/10: Important Pension Meeting - 13th December

25/11/10: Pension and Taxation Issues Under Recovery Plan

24/11/10: Packed Meeting Calls for End to Attack on Pensions

 

Pensions 2010 – Key Messages for INTO Lobby

Teachers’ pensions are under attack. The Minister for Finance has declared that significantly diminished terms will apply to new entrants and re-entrants from 2011. The three teacher unions (INTO, ASTI, TUI) strongly oppose the imposition of these changes.

A well-researched document – the Trident Report – has been commissioned and published (4 November 2010). Trident shows the extent and effect of the changes proposed. This has been followed by a lobby of Finance Spokespersons in the Dáil, and a request to meet the Minister for Finance. In addition, meetings have been arranged for members in the Dublin (23 November) and Cork (13 December) areas.  

A summary of the Trident Report follows and you can link to the full Report on the menu at the right hand side of this page.

Trident Report “Future Pension Provisions” summarised

1) Previous adjustments (e.g. 1995 and 2004) to the Teachers’ Superannuation Scheme, and to public service schemes generally, have reduced benefits and increased the proportion of retirement benefits funded by employees.

2) The Scheme’s main terms are now as follows:

a) The same PRSI is paid by teachers as private sector employees and they receive the same State pension as private sector employees (€12,017).
b) The retirement age is 65.
c) The scheme provides a maximum pension of 50% of ‘pensionable salary’ together with a maximum lump sum of 150% of salary.
d) For a typical retiree with at least 40 years’ service earning €68,448, this would equate to an occupational pension of €22,207 (32% of salary) which increases during payment in line with pay awards.
e) Therefore, the benefits by virtue of being a public sector employee (excluding the State pension which is paid to all employees) are a once-off maximum lump sum of €102,672 and an annual pension of €22, 207.

3) With the pension levy from March 2009, a new member joining the current scheme and who remains unpromoted requires the following contributions from the state as employer to help fund their pension costs.

a) Joining at age 21, a 3.4% contribution is required from the employer
b) Joining at age 25, a 5.7% contribution is required from the employer

4) The proposed new scheme from 2011– moving to “career average”, later retirement and CPI linkage – mark a drastic disimprovement in retirement benefits for new teachers and public servants generally.

5) The value of many teachers’ contributions under the proposed new scheme will exceed the value of benefits, a situation which is grossly unfair and which may be open to legal challenge especially since membership is compulsory. A meaningful employer contribution is a statutory requirement for private sector schemes.

6) This new scheme would be less generous than all private sector schemes and (actuarially) less valuable than no pension provision whatsoever.

7) If the pension levy were cut in half or abolished from 2011, the employer contribution then required for a teacher joining at age 21 would be just 1.5% or 4.9%, respectively.

8) The new scheme would result in a scheme pension of 26% of final salary after working for 43 years, compared to a 32% pension for working 40 years at present (lump sum falls from 150% to 129%). The disimprovement in conditions would be more severe for a teacher who is promoted in late career.

9) With changes over recent years (including 1995 and 2004) the existing pension terms for teachers are sustainable. Typically, an occupational pension of 32% of salary is payable at age 65 together with the once-off lump sum.

10) Alternative approaches to cutting costs, and especially to curbing the gains through final salary linkage for high earners on retirement, are available; these include setting a maximum public service pension or a hybrid pension where final salary applies up to a certain threshold.

11) The proposed single pension scheme, which needs the salary figure in each year of working in order to calculate the pension benefit, will be complex to administer.

12) Assumptions used in the Report are considered ones, with a conservative approach to the salary growth assumption.

13) The results are sensitive to the salary growth trend; if salary growth is significantly ahead of inflation, the new scheme would compare even more unfavourably to the current terms.

14) The value of promotion, especially in later career, would be reduced substantially in pension terms under the new scheme.

15) We have tested the new proposals across various scenarios and the following profiles are among those which would pay more in than they would get out of the new scheme:

a) age 21 joiner, no promotion, unbroken service;
b) age 21 joiner, Special Duties post at age 40, unbroken service;
c) age 25 joiner, no promotion, unbroken service;
d) age 25 joiner, no promotion, 5 year career break.