In a reply to a parliamentary question to Joan Burton TD, Minister Lenihan has confirmed the estimate provided by the Comptroller & Auditor General in his recent annual report that the total public sector pension liability is in the order of €108bn, up nearly 50% from the €75bn estimate provided by his Department in 2008, this estimate itself up nearly 70% from a previous €45bn estimate.
Commenting on the estimate, Deputy Joan Burton said: ”The estimated public sector pension liability is rising at an alarming rate. Given these shifting sands, it is difficult to get an accurate picture of where public sector pension liabilities actually stand. It is not clear whether we are comparing apples with oranges, but an increase in the estimated liability from €45bn to €108bn in two years is hard to comprehend. On a matter of such importance for our economic future, getting the sums wrong is just not acceptable.”
“To put this €108bn liability in context, the total value of the National Pension Reserve Fund is in the region of €20bn, a third of which has been pumped into our ailing banks.
“The Government published a comprehensive Green Paper on Pensions some time ago, but the much needed overhaul of our pension provision regime seems to have died on the operating table.
“When the current economic crisis passes, it is clear that we will be faced with a monstrous national debt. We also need to face up to the challenge of a greying population which will need to be provided for in old age. Fianna Fáil are clearly buckling under the day-to-day pressure of dealing with an economic crisis of their own creation. They have lost sight of strategically important policy challenges for which they don’t seem to have any answers.”
Below is the relevant parliamentary reply from Minister Lenihan, received by Joan Burton TD on 22nd September.
DÁIL QUESTION
NO 130
To ask the Minister for Finance his views on the estimate provided by the Comptroller and Auditor General in their recent annual report that the total public sector pension liability is in the order of €108 billion; and if he will make a statement on the matter.
– Joan Burton.
* For WRITTEN answer on Tuesday, 22nd September, 2009.
Ref No: 32387/09
REPLY
Minister for Finance ( Mr Lenihan) : The latest estimate for the gross accrued liability for public service occupational pensions is €108bn as of December 2008. This estimate is set out the in recent annual report of the Comptroller and Auditor General. This accrued liability figure is a single monetary amount representing the present value of all expected future superannuation payments to current staff and their spouses in respect of service to date, plus the full liability for all future payments to current pensioners and to their spouses. The large size of the figure is due to the fact that it represents a projection of aggregate pension payments that will be spread over perhaps 70 years into the future.
The estimate of the accrued liability should not be confused with the actual cash funding that will be required in the future. The more meaningful measure of public service pension costs is the actual annual gross outgo on pensions, which is expected to amount to 1.6% of GNP in 2009. The latest forecast is for this outgo to rise to 2.4% of GNP by 2023. The projected increase arises from the growth in public service employment in the past and from increasing longevity.
The 2008 Finance Accounts, to be published shortly, will include the estimate of €108bn for the total liability of public service occupational pension schemes as at 31 December 2008. The derivation of the accrued liability figure follows the approach set out in the new accounting standard issued by the International Public Sector Accounting Standards Board, IPSAS 25.