Pensions apartheid leaves those in the private sector at a huge disadvantage

IT IS hard not to conclude that senior mandarins and politicians have rigged the public service pensions system to suit themselves.

They have managed to insulate themselves from two hugely important rule changes.

A change in 2012 has left up to 42,000 current pensioners losing out on up to €35 a week in their payments.

This situation has been described as “bonkers” by Finance Minister Paschal Donohoe. But Social Protection Minister Regina Doherty has admitted it will take years to fix the anomaly.

Officials in her department are in the process of drawing up solutions.

The pensioners are missing out on a portion of their payments because they opted out of the workforce for a period.

The changes have particularly affected women who took time off to raise a family. This is exacerbated by the “averaging rule” that is used to calculate the weekly pension payment.

Averaging means the total number of PRSI contributions is divided by the number of years between when you started work and when you are entitled to the pension.

Reports last week had suggested Ms Doherty would be in a position to fix this issue in the coming weeks.

Now it has emerged that the issue will take years to sort out and cost as much as €70m to revert to the old system next year.

However, to resolve the problem entirely would cost another €180m.

This comes after the Department of Public Expenditure and Reform confirmed the existence of the “supplementary” pension being paid to retiring public servants.

It is basically a substitute State pension until you

actually get the State pension. And it means many State employees can escape pension rules that delay the payment of the State pension, a rule change that came in around 2014.

The State contributory pension is now only paid from the age of 66, meaning that thousands of private sector people who are compelled to leave work at the age of 65 have to claim Jobseekers’ Benefit.

This is despite public servants who have been recruited since 1995 being part of the Pay Related Social Insurance (PRSI) system that funds State pensions.

Civil servants insist that those who get the supplementary pension have to sign on to declare themselves as unemployed.

But they have an added advantage.

When they retire before the age of 66 – even if it is at 55 – the State pays supplementary pension to a level that brings them up to the maximum State pension rate, even if they have not paid enough PRSI contributions.

It means many public servants do not have to worry about the PRSI averaging system.

No wonder that many in the private sector feel there is a pensions apartheid situation at play, with goldplated public sector pensions on the one side, largely paid for out of taxes, and on the other side, many private sector workers have little or no occupational pension provision.

Public servants are sailing into the sunset with their supplementary pensions and their generous public sector defined benefit provision.

And they do not have to worry about things like the averaging rule.

They really don’t realise how lucky they are.

Public servants sail into the sunset with generous benefit provisions