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Grey matters: Demystifying pensions

Pensions can seem complicated, but they don’t have to be. People have common questions when starting to plan their pension and at Zurich we like to help with simple yet informative answers.

Putting a little aside today could help you live an active and enjoyable life when you retire. There is more than one way to enjoy your retirement and there is more than one type of pension. We can help you choose the one that is right for you, but most importantly, you have full control when it comes to deciding how your pension is invested – after all, it’s your money. With tax relief, employer contributions and optional lump sum payments, you may be able to save more than you think.

When choosing a pension having all the information you need is key. By answering some common questions we hope this helps explain pensions and how they work.

1. How does a pension work?

Each payday, each year or as often a you like, you save some money into a retirement fund. Your fund is put away and invested and is encouraged to grow over time so that when you finally decide to retire you’ll have enough saved to live out your life, happily. Essentially, a pension is a way of saving for the long term. But its different for two reasons: tax and time.

When you save money in a pension you may get tax relief on it, so the real cost could be less than you might think. Secondly, any returns you earn on your investment are reinvested over-and-over. Of course it all depends on how your investment performs but even a small amount saved in a pension when you are young could become very large by the time you retire.

2. How much do I need to save for my retirement?

How much you put into your pension pot depends on the type of lifestyle you would like to have and the length of time you will spend in retirement. Obviously, no one knows exactly how long they will live for and therefore how long their pension will need to last for. One thing we do know is that the sooner you start a pension, the bigger it should grow.

Due to better health for an ageing population, life expectancy is increasing. Most of us can now look forward to around 30 years in retirement, which is great news. How you support yourself financially during those years is the big question. It is important when planning your retirement to ensure you have built up a substantial pension fund by the time you retire.

3. How is my money invested?

A key factor in helping you grow your retirement fund is the investment return you could earn on your pension contributions. Any contributions you make into a pension will be invested in a fund, with a view to growing your money. Where your money is invested and how much risk you are prepared to accept is completely up to you. However, a general rule of thumb is the further you are from your retirement, the more adventurous you can be with your investment choice. An expert such as a financial broker or advisor will be able to help you work out what investment choice might best suit you. Zurich Life offers you access to a wide range of investment funds and choices – from very low risk options such as cash funds, medium risk options like multi-asset or managed funds, and higher risk options such as equity and property funds.

4. How does the tax relief work?

Saving for your retirement is down to you, but to encourage you to save for you future, you will receive valuable support from the government in the form of tax relief. It’s one of the most compelling reasons to save through a pension. Other forms of savings, like bank accounts or savings plans, do not attract such generous incentives.

Every contribution you make to a pension plan receives tax relief based on the rate of income tax you pay (most of us pay income tax at a rate of either 20% or 40%).

5. If I have my own pension will I still be entitled to the State pension?

You can still have your own pension and receive the State pension as long as you meet the criteria. To qualify for the contributory State pension you must have started paying social insurance before reaching 56 years of age. You must have paid at least 520 full rate social insurance contributions and have a yearly average of at least 48 paid and/or credited full rate contributions from the year you started insurable employment until you reach 66 years of age. If you don’t have the above then you must have a yearly average of at least 10 paid and/or credited full rate contributions from the year you started insurable employment to the end of the contribution year before you reach the age of 66.

6. Is it too late for me to save for my pension?

Planning for retirement is an important step to take, and it’s never too soon or too late to start planning your pension, which will help you to have the lifestyle and financial stability you desire in your retirement.

Although it’s never too late to start saving for your retirement, obviously the sooner you start the better. Regardless of your age, whether you’re self-employed or an employee, we’ve created pension plans for all circumstances. See which pension is right for you.

7. When can I access my pension savings?

In Ireland, tax relief is given for saving for retirement, therefore withdrawing your funds ahead of time is not encouraged and is often only allowed if there is a case of ill-health, such as that caused by a long-term disability. If this is the case and you are experiencing a serious illness, then you can access your personal pension at any age. Otherwise, if you want to access your pension early, you must wait until you’re 50 to draw it down if you are in an occupational pension scheme and you must be 60 if you have a PRSA (50 if you’re an employee and leaving service) or a retirement annuity pension.

8. What are my options at retirement?

After you have taken your retirement tax free, cash lump sum you can choose between an annuity and/or an Approved Retirement Fund (ARF). An annuity is whereby on retirement you receive a regular income for the rest of your life. Annuities may be more suited to people who wish to avoid potential risks such as stock market volatility, and would prefer a guaranteed income for their retirement.

There are several choices you need to make when purchasing an annuity: A single life annuity is payable for the rest of your life only. With a joint life annuity, a percentage of your pension is payable to your spouse after you die. If you choose to include a guaranteed period, your pension will be payable for a minimum of the guaranteed period, even if you die during that time. A level annuity means payment of the annuity remains the same throughout your life and an escalating annuity means payment of the annuity increases at a fixed rate each year.

An ARF is a personal retirement fund where you can keep your money invested after retirement. You can withdraw from it regularly to give yourself an income, which will be subject to income tax, PRSI (up to age 66) and USC. Any money left in the fund after your death can be left to your next of kin.

There are certain restrictions to investing in an ARF. A Financial Advisor will help guide you on the option that might best suit you.

9. Defined benefit vs defined contribution

Company pensions can generally be categorised as being either defined benefit or defined contribution. A defined benefit pension plan (DB) sets out the specific benefit that will be paid to a retiree. This calculation takes into account factors such as the number of years an employee has worked and their salary, which then dictates the pension and/or lump sum that will be paid on retirement.

A defined contribution pension (DC) is an accumulation of funds that makes up a person’s pension pot. A person contributes a portion of their salary to a pension scheme. Ideally, although not always, their employer also contributes and these contributions are invested in a fund in order to provide retirement benefits. There is tax relief on this type of pension and the benefits at retirement will depend on a number of different factors such as the contribution levels, how the investment fund performs, plan charges and fees and the annuity rates available when you retire.

The main difference between a defined benefit scheme and a defined contribution scheme is that the former promises a specific income and the latter depends on factors such as the amount you pay into the pension and the fund’s investment performance.

10. What are the fees associated with my pension?

There are different sets of fees depending on the type of pension you take out and which organisation you hold your pension with. The Pension Authority advises that consumers get to know the typical charges that can apply. These might include entry fees, contribution charges or bid/offer spreads, annual management charges (AMC), policy charges/per member fees, switching charges and Pension Authority fees.

11. Do I need to speak to a financial broker or advisor?

We know talking about pensions won’t get your pulse racing. And of course, you’d rather be living your life than worrying about your retirement. But we also know that the sooner you deal with it, the better off you’ll be come retirement.

As this is your money and your future, it’s always advisable to speak to a financial advisor. You can call us on 018298500 to arrange an appointment with one of the IPF team.

The information contained herein is based on Zurich Life’s understanding of current Revenue practice as at November 2017 and may change in the future.

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End of Year Awards 2017


Congratulations to the winners of our staff awards on Friday night, Jennifer Fitzgerald (Administrator of the Year), Marcin Czekalski (General Insurance Advisor of the Year), Louise O’Brien (Manager of the Year) and John McEntee (Assistant Financial Advisor of the Year).

These awards are given to those who have excelled in their fields over the last twelve months and have gone above and beyond to support their colleagues and clients.

Well done to all!


Also, voted Colleague of the Year by her peers was Brid Holligan. Congratulations!

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Generation Rent: The importance of being earnest

Couple looking at a house

Generation Rent: The importance of being earnest


According to Savills 18% of people in Ireland now live in private rental accommodation, which is 497,111 households. With no real history of long-term letting or leases and the introduction of Rent Pressure Zones to try to slow down rent increases, the growing concern is how renters can protect themselves in this progressively volatile market.

A report from Goodbody Stockbrokers in May showed that the average price of a house is set to soar, escalating by 10% this year and by another 8pc by the end of 2018. In turn, more people are renting accommodation, with an earnest focus on saving to get onto the property ladder.

The rise of generation rent is evident but it is a culture that before now was not commonplace in Ireland. Traditionally, third level students aged 18-25 years and single people aged 20-35 years was the profile of renters. This profile has extended to include individuals and young families in their 30s, 40s and 50s. Other mainland European countries, such as Germany, have had a longer history with long-term renting, where accommodation leases are available for up to 10 years and subletting apartments to hold onto a lease is the norm. The introduction of longer rental leases here could be a solution by offering more security to renters and landlords, both benefitting from the longer-term arrangement.

According to daft.ie, our rented sector can be split into categories: ‘movers’ and ‘stayers’. One of the main reason people choose not to move regularly is if rents are rising rapidly in the market and there is a lack of availability, even if the accommodation they are in is not 100% suited to their needs. The former Minister for Housing Simon Coveney brought in Rent Pressure Zones (RPZs) in reaction to the increasing market rents, which came into effect in December 2016. This means that rent increases in these areas can be capped at 4% annually, and is seen as another reason why the amount of stayers has risen significantly.

Stated in the Daft.ie rent price report for Q1 of 2017: “Since 2013, market rents nationally have risen by just over 50%. However, sitting rents have increased by just 27%. In other words, those who have stayed in the same lease have enjoyed a discount relative to market rents, with rents increasing by just half the increase seen on the market.”

Sitting tenants now enjoy not only a discount relative to the market rent, but also protection of that lower rent into the future. Meanwhile, movers in the private rented sector face not only far higher rents but almost no availability in the market.”

Rent Pressure Zones

At a recent off-site strategy meeting with the now Minister for Housing Eamonn Murphy, it was suggested that a new city be formed in the midlands to help with the “choke” on Dublin. However, while the capital remains the most expensive place to rent, prices across the country have also seen increases but with varying degrees. Figures from Daft.ie, show that in Dublin, rents are now an average of 15.4% above their previous peak while in Cork and Galway cities, rents are 9.7% and 17.8% above levels recorded nine years ago. Outside the cities, the average rent is 3% above its previous peak.

In the three of the counties closest to Dublin – Meath, Kildare and Louth – rents have increased by more than 60% since 2012, which is to be expected considering a lot of people have turned to commuting from further distances in order to be able to find accommodation and affordable rent.

All three cities in Munster saw their rents increase by at least 10% in the year, as did Waterford, Cork and Clare counties. However, fewer than 800 homes were available to rent in Munster on May 1st, a decrease of almost 100 on the same date a year earlier. In fact, Ronan Lyons from Daft.ie reported that there were “fewer than 3,100 properties available to rent nationwide on May 1st compared to 4,000 three months previously.”

Getting protection

With a concerning fluctuation in the number of houses available, for sale or let, the importance of protection for generation rent is crucially important. The rental market is an added pressure in itself for renters, leaving them vulnerable in many ways. But how would they cope if, for example, they became ill and couldn’t pay the rent?

Renters like mortgage holders need similar protection and a life insurance policy could be used to offer that much-needed security. Zurich Life offers serious illness cover that enables you to gain assistance at a time when you need it most. If you have to stop work due to a serious illness diagnosis, this cover provides you with financial support that could cover your rent during your treatment.

Regardless of your living arrangements, a life insurance plan can be used to protect you and your family from financial strain should you become ill and are unable to provide for them. There is no reason why as renters, you can’t have similar financial protection to mortgage holders. To find out more about the right protection plan for you visit Zurich Life or speak to a financial broker.

Reference: ZurichLife

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What can I do with my pension if moving job?

Q&A: Dominic Coyle, Irish Times, 1st August 2017

‘I’m hoping you can give me some general guidance on a pension matter. I will be leaving my job next month after 10 years to return to college.

I have a defined pension contribution with my employer (Investment fund name Dynamic Pension and investment with Zurich). The current value stands at approx €65,000. Do I just leave it sitting there and transfer it to a new employer when I start a job in two years hopefully? Or someone mentioned to me about converting it to cash so that it doesn’t lose its value?

Pensions are foreign territory, so any help would be greatly appreciated!’

Ms M.O’D., email


Pensions are foreign territory to pretty much everyone, not least because there are so many different scenarios and the industry itself does little or nothing to make them more readily understandable.

I can pretty much guarantee that, regardless of what I say to you, someone in the industry will contact me to tell me that there was a different approach that I should have considered.

For this reason – and more importantly because you have significant savings of €65,000 tied up in this pension – it is important that you talk to an independent financial adviser, not be someone from Zurich which, naturally, cannot consider itself independent as it currently manages your fund.


Having said all that, there are a few things you should consider .

The Dynamic fund in which you are invested seems to have performed at or above average over the past decade or so. That’s hardly surprising as it is currently 92 per cent invested in stock market shares, or equities as they are also known. Stock markets have enjoyed sustained growth in recent years, and generally outperform other asset classes over the long term.

This is fine if you are younger with a reasonably long horizon before retirement. As you come nearer to retirement age – and you have less time to recover from nasty investment shocks – most advisers will move you away from equity-heavy funds to something with a lower risk profile, generally with a heavier weighting of cash and government bonds.

As you don’t give me any indication of age and retirement expectations, I can’t comment further. What I can say is that the Zurich Dynamic fund is classed as medium to high risk by the company itself, with a ranking of 5 on a scale of 1-7. You can find an explanation of Zurich risk rankings here: https://www.zurichlife.ie/funds/risk-ratings/.

As this is a defined contribution scheme organised through your current employer I assume you will have been given some advice of selecting this fund in the first place, and are happy to take on a reasonable amount of investment risk in the hope of securing higher investment returns – though your comment about “foreign territory” does make me wonder.


So what are your options now?

In general, when you leave an employer – and assuming you have been there more than two years, as you have been – you have three alternatives:

1. Leave it there: you can leave the pension where it is in your employer’s scheme and it will continue to grow (or diminish) according to market movement. It may well be open to you to move the savings within the employer’s fund to a slightly lower risk investment option if you are concerned about volatility, but you should certainly take professional advice before doing so. You will not be able to add further to this fund once you have left your current job.

When you retire, as with any other pension you have at that time, you will be able to draw some of it down in cash and take the rest by way of an annual annuity payment or transfer it into an Approved Retirement Fund where it can remain invested and, hopefully, continue to grow.

2. Purchase a buy-out bond: a buy-out bond, or a personal retirement bond as it is also known, allows you to transfer your current benefits to a personal pension plan controlled by you. You can change the way it is invested but you cannot add further to it. Your choices at retirement are the same as with any of the other options.

3. Transfer to a new employer’s pension scheme: obviously this is not relevant during the time of your study but you could still transfer from your current scheme to a new employer’s scheme when you secure work after your course. Any decision to do so would be based on the investment options offered by the new employer compared to your existing one and the charges involved.


In your particular case a fourth option is available. You can transfer the money for your current pension fund to a Personal Retirement Savings Account (PRSA). As I understand it, this is confined to people with less than 15 years’ service with their employer, which seems to cover you.

Given the size of your fund, however, you would need to secure something called a Certificate of Comparison highlighting the advantages and disadvantages of such a move. It examines the benefits you are likely to receive under your current scheme and the benefits likely to accrue within a PRSA. It comes with a written statement explaining why a transfer to a PRSA is in your best interest. That certificate and statement could cost you €2,000 or more.

The advantage of a PRSA over, say, a buyout bond is flexibility in that you can continue to add to the PRSA even while in college if you choose but also when you go back to work. You also have considerable control over how it is invested.

However, unsurprisingly, charges on individual PRSAs tend to be higher than you would encounter in group schemes, say with an employer. Also, an employment-based pension scheme generally offers additional benefits such a death in service and permanent health insurance should you no longer be able to work due to illness or injury.

There is also the question of whether your new employer would be willing to make contributions to a PRSA if they already fund an occupational scheme. Employer contributions are a big factor in helping your fund grow.

So, which option should you choose?

That all really depends on you, but you should consider carefully the charges associated with any of the options before selecting one. Charges eat into investment returns, and a small difference in charge can have a large impact on your final pension fund. If you are paying more the fund needs to be delivering a notably better return to overcome that impact.

You also mention the prospect of converting it into cash “so that it doesn’t lose its value”. Two things arise.

First, as you are in your current scheme more than two years, you cannot liquidate it – i.e. get your cash back, albeit after tax. The money is now locked into a pension fund of one sort or another until retirement.

You could transfer the money – possibly even within your current employer’s scheme or else through a buyout bond or a PRSA – so that it is invested only in cash. You would eliminate a lot of the volatility inherent in a fund invested heavily in equities. However, you would also be sacrificing any opportunity for that investment to grow as it will need to to provide a reasonable retirement income.

And the scheme will still lose its value. The impact of inflation will eat into the value of cash anyway. While inflation is low currently, it still has a cumulative impact over time, and policymakers are actively trying to raise the rate of inflation to around 2 per cent per annum.

In addition, a cash fund still has management charges even if they are lower than with an actively-managed equity fund, and those will also eat into the value of your pension.

Personally I don’t think a 100 per cent switch into cash makes any sense for you, but that is speaking as a journalist who writes in this area and not as a qualified professional investment adviser.

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Co-Habiting couples – The unintended Inheritance Tax nightmare!

When the ‘Civil Partnership & Certain Rights and Obligations of Cohabitants Act 2010’ (Civil Partnership Act) was passed, it created the legal status of civil partnership for same-sex couples. This meant that the property and financial entitlements that previously only applied to married couples would now apply to registered civil partners. However, the Act only applies to same-sex couples who have registered their relationship. This has caused some confusion for co-habitants of the opposite sex, who perhaps believed that they too should enjoy these financial entitlements.

Unfortunately, this is not the case as the Act’s logic suggested that opposite sex couples could get married, whereas same-sex couples couldn’t. The Civil Partnership Act defined a qualified Co-Habitant as being “An adult who is in a relationship of cohabitation of 2 years or more (if dependent children are involved) or for 5 years or more in other instances” meaning that either can now legally claim from their deceased cohabitant’s estate. However, little known to many is that inheritance tax will still be liable, and it will be payable at the Group C €16,250 threshold!


The Inheritance Tax nightmare

There are two important points to be aware of when arranging a protection policy for non-married/cohabiting couples;

  • If they arrange a protection policy on their own lives for whatever purpose, the surviving partner may be left with an inheritance liability. If the survivor is deemed not to have paid premiums, problems arise!


  • That they are still treated as strangers in the eyes of Revenue so for inheritance tax purposes, the threshold which applies being €16,250.


Care is needed as to how policies are set up, with the following considerations;

  • Who pays the premiums?
  • Can the small gifts exemption be used?
  • The Dwelling House Exemption?


Let’s take the example of Ann and Tom A co-habiting couple, Ann and Tom, decide to take out life cover of €300,000 on a joint life basis to cover any losses each may experience if one of them were to die. Tom is currently unemployed, so Ann will be paying the total premium on the policy until such time as he is employed. What would the inheritance tax situation be if Ann were to die prematurely?

Unfortunately for Tom, as Ann has paid all the premiums, he is deemed to inherit the whole €300,000 from Ann and has to pay inheritance tax on it. Assuming he has not received any other assets under Group Threshold C previously, his tax liability is: €300,000 – €16,250 x 33% = €93,637.50 If Tom was in a position to say he’d paid for half of the premiums out of their joint account, this would help reduce the tax liability by half, as it’d be assumed he’s inherited half of the sum insured. €150,000 – €16,250 x 33% = €44,137.50 Either way, Tom pays Revenue within a certain time frame either the sum of €93,637.50 or €44,137.50.


What’s the solution?

The ‘Life of Another’ Arrangement

Under a simple ‘Life of Another’ arrangement, both Tom and Ann take out separate Life Insurance policies on each other, Tom insures Ann and vice versa. This means that each of the policies is owned separately, clearly identifiable and there should be no liability to inheritance tax as they each pay for their own policies.

Tom is unable to pay premiums, he is unemployed? This can be solved by Ann using the Small Gift Tax Exemption by ‘gifting’ the premiums to Tom which Tom will use to pay for the policy he owns. The Small Gift Tax exemption is €3,000 a year from any one person to another, so if the premiums are below €3,000 a year, Tom can claim the premiums were gifts. Therefore, in the scenario where Ann was to die, Tom receives the proceeds of the policy he owns without any liability to inheritance tax.


The ‘Section 72’ solution

Alternatively, each could take out a separate Section 72 life insurance policy to pay off any inheritance tax liability. Section 72 policies are set up under Section 72 trust, meaning that the proceeds of such policies are exempt from inheritance tax insofar as the proceeds are used to pay inheritance tax. This arrangement may be more important to cover any tax liability for the dwelling house in which the couple are living. For Tom and Ann, if they buy a house in joint names and one of them dies, the survivor may have a liability to inheritance tax on the value of the house (assuming the house is held as joint tenants). However, in this case they may be able to avail of the Dwelling House Exemption.

The Dwelling House Exemption provides a complete exemption from inheritance tax on the value of their home, provided certain conditions are met, basically, that it was and continues to be their home but with having no other interest in any other property. So, if either Tom or Ann had previously owned a property before they met and continued to own it when they began co-habiting, they would not be able to avail of the relief and would have a liability to inheritance tax on the property – not an unusual situation for couples.

Tom and Ann’s house is valued at €500,000 and they contribute equally to deposit, mortgage repayment and joint mortgage protection policy. Again, if Ann were to die, Tom inherits the house but because he still owns a property purchased a few years back, he is unable to avail of the Dwelling House Exemption. The mortgage is cleared by the mortgage protection policy and he inherits Ann’s 50% of the property, so his inheritance tax liability is 50% of property = €250,000 Threshold for Tom = €16,250 Residual taxed = €233,750 x 33% = €77,137.50 The solution in this case would be to either increase the sum insured on the mortgage protection policy to cover the inheritance tax liability or take out a Section 72 policy so the inheritance tax liability is cleared.

Both Tom and Ann could take out a policy on their own life and hold it under Section 72 Trust, with the other being the beneficiary. In the event of either dying, the sum insured is payable to the survivor as beneficiary, who uses the money to pay off any inheritance tax liability. In conclusion, when considering protection policies as a co-habiting couple, it is necessary for the adviser to clearly:

  • The needs of the clients,
  • Trace whatever tax liability they may face in the event of either dying, and
  • Put a structure in place that will ensure the proceeds of policies are paid out in the most tax efficient manner.



Ref: Zurich Life, Tech Talk, June 2017

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New Public Sector pay deal: What it could mean for you

Average-earning staff on about €55,000 who were appointed before 2013 are set to receive pay improvements of about €4,000 over three years.

What are the proposed pay improvements?

From January 1st 2018, public service staff will receive a 1 per cent pay rise with a further 1 per cent increase to follow on October 1st next year.

Staff earning up to €30,000 will receive a 1 per cent rise in January 2019 with all personnel to get a 1.75 per cent increase in September 2019.

A further rise of 0.5 per cent will be put in place for those on salaries of up to €32,000 in January 2020 with all staff to get an additional 2 per cent in October 2020.

What are the changes to the pension contribution?

The existing public service pension levy, which was introduced as a financial emergency measure in 2009 is to be converted into permanent additional superannuation contribution on a three-tier basis which is aimed at reflecting differing pension benefits.

For those appointed before 2013 the rate of the new contribution will be the same as the pension levy at between 10 per cent and 10.5 per cent, depending on salary levels. However, the income threshold on which payment is exempt will rise to €32,000 in January 2019 and to €34,000 in January 2020.

What about those appointed since 2013

For staff appointed since 2013, and who are covered by the less generous career average scheme, the contribution will be set at 6.6 per cent for those earning between €32,000 and €60,000 and 7 per cent for on salaries above that level from January 2019.

It will be reduced to 3.33 per cent for those earning between €34,500 and €60,000 and at 3.5 per cent for those earning more than €60,000 in January 2020.

What about those on faster-accruing pensions, including certain gardaí, military personnel and prison officers?

Those with faster-accruing pensions will continue to pay the existing levy rate of 10 per cent on salaries between €28,750 and €60,000 and 10.5 per cent in salaries above €60,000.

In absolute terms, what does this mean?

Average-earning staff on about €55,000 who were appointed before 2013 will receive pay improvements of about €4,000 over three years.

Employees on similar salary levels recruited since 2013 will get about €5,400. The pay improvements come from a combination of salary rises and reforms to pension contributions.

Those with faster accruing pensions will benefit least. The move will erode in relative terms some of the gains made by gardaí from the controversial deal last November to avert a threatened strike.

Are there any changes to the additional “unpaid hours”?

The highly controversial requirement for staff to work additional, unpaid hours – introduced under the Croke Park and Haddington Road agreements – is to remain in place. However, staff will be given two opportunities, next year and in 2021 to revert back to their previous shorter working week on condition that they agree to a corresponding pay cut.

The Government argued this productivity measure was just too valuable to concede as the elimination of these additional working hours would cost it over €600 million.

How much will the deal cost the State?

It is understood the deal will cost the exchequer €880 million over three years, thus using up around one third of the total room for spending increases and tax cuts in the October budget.

Minister for Public Expenditure Paschal Donohoe said the deal was “in line with what is affordable to the State”. He said he would now take these proposals to Government – for approval by the cabinet next Tuesday.

What happens next?

The proposed deal will have to be considered and voted on by individual trade unions and staff associations before it can be finally ratified, probably in September.

Sarah Burns, Irish Times

Thu, Jun 8, 2017


Photograph: istock

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Younger workers to be left behind in new Public Sector pay deal

• State plans to retain lower pay rates for 50,000 newest teachers, nurses and gardaí • Lower pay rates to cost young teachers €75,000 over the course of their career

The government is determined to keep a two-tier pay system in place in a new public sector pay deal, in a move that will amplify the division between younger and older public sector workers.

It will be a major flashpoint for at least 50,000 teachers, nurses, gardaí and other public servants who have been recruited on lower pay rates over the past six years.

They had expected that the talks on the new pay deal, starting next week, would bring them into line with their older colleagues.

But it is understood that the government’s firm position is that it will not pay “over the odds” for new recruits when there are no problems with recruiting teachers, gardaí, civil servants and council workers.

The key argument made by unions against lower pay rates for newer public sector workers was that it was affecting recruitment. Government sources, however, have pointed to the findings of the Public Sector Pay Commission, which found there was “no evidence” that the reduced pay rates for new entrants were affecting recruitment to the public service in general.

Official figures supplied to the commission show that there were:

● Around 43,000 applications for around 4,000 civil service posts in the most recent recruitment round in 2015;

● Around 5,000 applications for 650 new positions in the Garda Síochána last year, and

● Around 1,200 applications for 112 senior executive jobs in councils this year.

Unions privately acknowledge that their case for pay equality has not been helped by the findings of the pay commission report. Pay rates were cut by 10 per cent for teachers, nurses, gardaí and other public servants who joined after January 2011.

Although some of the cuts have been reversed, they are still two years behind on the salary scales. Teaching unions have estimated that the current lower pay rates for new teachers will cost them €75,000 over the course of their career.

Due to the limited money available for pay rises, any move towards pay equalisation for younger public servants will reduce the potential for pay rises for older public servants.

Unions believe, however, that it may be possible to increase pay for the 50,000 public servants who joined after 2013. They are on an average career pension that is far less valuable than the pensions for the other 85 per cent of public servants who joined before 2013. Unions believe that giving the post-2013 workers a higher reduction on their pension levy than longer-serving public servants would be a way of increasing their pay.

“You could design something around that,” a union source said.

Pay equality was the issue that ASTI campaigned on when it went on strike for three days last year. But getting rid of reduced pay rates for teachers and other education staff would cost €85 million per year and make it more expensive to recruit new teachers. There are similar reduced pay rates in place right across the public sector.

However, the public service pay commission did acknowledge there are shortages of nurses in mental health services and emergency departments. The HSE is also unable to recruit enough hospital consultants, radiographers and psychologists.

Fianna Fáil public expenditure spokesman Dara Calleary said that consideration should be given to higher pay in areas of the health service struggling to get recruits.

“The inability to fill certain positions is directly contributing to the major problems with waiting lists,” he said.

By Michael Brennan, Sunday Business Post,