Government agrees to reduce Public Service Pension Reductions 

By 2018 65,000 lower paid pensioners to be removed from pension reduction

In January 2011, as part of the response to the fiscal crisis then faced by the country, an emergency measure to reduce public service pensions (Public Service Pension Reduction- PSPR) in payment was introduced. A further reduction for higher value pensions was introduced in July 2013.

In welcoming the proposals developed between public service employers and the representative associations and unions for an extension to the Haddington Road Agreement out to September 2018, I indicated that I intended to bring forward separate proposals to Government to provide for a commensurate reduction in the Public Service Pension Reduction as it applies to retired public servants

The proposals approved today deliver upon my stated commitment to move towards reducing the burden of public service pension reductions, with the initial focus on the people in receipt of low pensions, at the earliest date economic progress permits.

These proposals in respect of public service pensioners are prudent in the context of the fiscal space available to the Government and will not compromise the ongoing recovery in the Government finances.

The changes provide for a restoration of pension income subjected to the Public Service Pension Reduction on a phased basis over three years as follows,

  • 1 January 2016 – return of €400 to most PSPR-impacted pensioners
  • 1 January 2017 – return of €500 to most PSPR-impacted pensioners
  • 1 January 2018 – return of €780 to most PSPR-impacted pensioners

and/or removing pensioners from the PSPR “net” entirely;

Note to Editors:

The Public Service Pension Reduction (PSPR), commencing 1 January 2011, imposed reductions on annual public service pensions in payment in excess of €12,000, using a progressively tiered set of bands and rates with a top rate of 12% on any public service pension amount over €60,000. The legislation was amended from 1 January 2012 to increase the top rate of PSPR from 12% to 20% on the portion of any public service pension amount in excess of €100,000.

The Financial Emergency Measures in the Public Interest Act 2013 also provided for additional Public Service Pension Reduction rates ranging from 2% to 8% to be applied to all annual public service pensions in payment in excess of €32,500 from 1 July 2013.

Full-year savings from these pension measures is currently in excess of €125 million.

The cost of the measures is estimated at some €30m per annum or a cumulative cost of €90m over the three years to end 2018.

The number of pensioners affected by PSPR is 90,000.

PSPR Amelioration

On the proposal of the Minister for Public Expenditure and Reform, Mr Brendan Howlin TD, the Government has agreed to proceed with the necessary legislative amendments to ameliorate the effects of the “Public Service Pension Reduction” (PSPR), which reduces the pensions of many public service pensioners under the Financial Emergency Measures in the Public Interest Act 2010.

The agreed changes, which are to be implemented in three stages on 1 January 2016, 1 January 2017 and 1 January 2018, will deliver a significant income boost to many PSPR-affected pensioners.

The details of the changes for each year are set out below, along with tables which illustrate the effects on pensioners at different income levels.  Note that the changes impact on the following three pensioner groups (who are currently impacted by separate PSPR reduction tables under the legislation):

Group 1: Pensions (pre-PSPR) above €12,000 and below €34,132, retirements before March 2012.

Group 2: Pensions (pre-PSPR) above €34,132, retirements before March 2012.

Group 3: Pensions (pre-PSPR) above €32,500, retirements from March 2012.

 

2016 PSPR Changes

Group 1: Increase exemption threshold (0% band) from €12,000 to €18,700.

Group 2: Increase 0% band upper limit from €12,000 to €17,000.

Group 3: Increase 0% band upper limit from €12,000 to €29,300.

2016 Annualised Benefit of PSPR amendments
Gross Pension Retired before 1 March 2012 Retired after 1 March 2012
% %
     14,000 120 0.9%
     16,000 240 1.5%
     18,000 360 2.0%
     20,000 402 2.0%
     25,000 402 1.6%
     30,000 402 1.3%
     32,000 402 1.3%
     35,000 400 1.1% 399 1.1%
     40,000 400 1.0% 399 1.0%
     50,000 400 0.8% 399 0.8%
     60,000 400 0.7% 399 0.7%
     70,000 400 0.6% 399 0.6%
     80,000 400 0.5% 399 0.5%
   100,000 400 0.4% 399 0.4%

 

2017 PSPR Changes

Group 1: Increase exemption threshold (0% band) from €18,700 to €26,000.

Group 2: Increase 0% band upper limit from €17,000 to €22,000;

Reduce rate on pension amount between €22,000 and €24,000 from 8% to 3%.

Group 3: Increase 0% band upper limit from €29,300 to €39,000;

Reduce rate on pension amount between €39,000 and €60,000 from 3% to 2%.

2017 Annualised Benefit of PSPR amendments
Gross Pension Retired before 1 March 2012 Retired after 1 March 2012
% %
     14,000 0.0%
     16,000 0.0%
     18,000 0.0%
     20,000 78 0.4%
     25,000 408 1.6%
     30,000 498 1.7%
     32,000 498 1.6%
     35,000 500 1.4% 171 0.5%
     40,000 500 1.3% 301 0.8%
     50,000 500 1.0% 401 0.8%
     60,000 500 0.8% 501 0.8%
     70,000 500 0.7% 501 0.7%
     80,000 500 0.6% 501 0.6%
   100,000 500 0.5% 501 0.5%

 

2018 PSPR Changes

Group 1: Increase exemption threshold (0% band) from €26,000 to €34,132, thereby removing PSPR from this Group entirely.

Group 2: Increase 0% band upper limit from €22,000 to €30,000.

Group 3: Increase 0% band upper limit from €39,000 to €60,000.

2018 Annualised Benefit of PSPR amendments
Gross Pension Retired before 1 March 2012 Retired after 1 March 2012
% %
     14,000 0.0%
     16,000 0.0%
     18,000 0.0%
     20,000 0.0%
     25,000 0.0%
     30,000 360 1.2%
     32,000 540 1.7%
     35,000 780 2.2% 0 0.0%
     40,000 780 2.0% 20 0.1%
     50,000 780 1.6% 220 0.4%
     60,000 780 1.3% 420 0.7%
     70,000 780 1.1% 420 0.6%
     80,000 780 1.0% 420 0.5%
   100,000 780 0.8% 420 0.4%

 

PSPR Changes – Cumulative Annual Benefit from January 2018

3 Year Cumulative Annualised Benefit of PSPR amendments
Gross Pension Retired before 1 March 2012 Retired after 1 March 2012
% %
     14,000            120 0.9%
     16,000            240 1.5%
     18,000            360 2.0%
     20,000            480 2.4%
     25,000            810 3.2%
     30,000         1,260 4.2%
     32,000         1,440 4.5%
     35,000         1,680 4.8% 570 1.6%
     40,000         1,680 4.2% 720 1.8%
     50,000         1,680 3.4% 1,020 2.0%
     60,000         1,680 2.8% 1,320 2.2%
     70,000         1,680 2.4% 1,320 1.9%
     80,000         1,680 2.1% 1,320 1.7%
   100,000         1,680 1.7% 1,320 1.3%