Nice little earner... when retiring
HARD-UP councils may have to find an extra €2.6million to pay off retiring councillors and those who have lost their seats.
The extra chunk of money is due to an increase in the maximum retirement gratuity paid to departing councillors, from €77,816 to €86,169.
An internal memo from the Department of Public Expenditure and Reform reveals the bill for the scheme’s uptake could vary from €21,283,743: an increase of €2,063,191, to €26,970,897: an increase of €2,614,489.
And the memo reveals councillors were initially seeking €114,892 as the price of leaving or being discarded by the electorate.
Councillors do not pay pension contributions nor do they receive a pension upon retirement.
Instead, they accrue a gratuity based on years of service with a maximum gratuity after 20 years of service.
The gratuity was developed in the hope that it would encourage councillors to retire and attract ‘new blood’ into local government.
As part of this objective, the gratuity’s scale is to increase to €86,169, following the Moorhead Report on councillor pay and supports saying: ‘The Government approved reforms to councillor remuneration with effect from July 1, 2021.’
A happy consequence of this is that councillors’ salaries have been increased from €19,954 per annum to €28,723, a rise of almost €9,000.
This created a major financial opportunity for departing councillors as the calculation process for the final gratuity was measured on a scale of a fifth of the salary of a councillor for every year they served.
If such a scale applied to the current election, after the post-Moorhead pay increase, councillors would have been entitled to a generous six-figure retirement bonus.
A solution was found where ‘the proposal is that the new gratuity will be based on 3/20ths of current salary per year, up to a maximum of 20 years’.
The submission to Public Expenditure Minister Paschal Donohoe warns local councils will have to foot the bill noting: ‘The Department of Housing has not requested additional funds to cover an increased gratuity as part of the 2024 Estimate process.’ And the costs, ‘will be met by local authorities from within existing resources’.