Almost 200,000 civil servants are benefiting from the surge in inflation because their pension pots are guaranteed to increase in value.
all families are struggling with rising prices, exacerbated by the energy crisis.
But soaring rate increases are proving to be a boon for both current and retired civil servants who entered the public service after January 2013.
Because their public “pension pots” are guaranteed to increase in value indefinitely with inflation.
High inflation is also fueling the tax-free lump sums public servants will receive.
The pension gap between the public and private sectors is likely to widen. Similar provisions are rare for private sector pensions because they are expensive to provide.
The revelation comes as public sector workers received a 1 percent pay rise in October 2021 and will receive another 1 percent raise in October this year.
Talks between unions and the Ministry of Public Expenditure over a possible new public sector pay deal will begin later this month, with unions calling for increases of at least 5 percent.
It has now turned out that everyone who entered the public service after January 2013 will have increased amounts paid into their pensions in line with the inflation rate of the previous year. The majority of those currently employed in the public sector joined after 2013.
The deal means higher pension amounts for those who have retired. Public sector pensions are considered among the best in the country. These defined benefit arrangements are so expensive to fund that they have largely disappeared from the private sector.
A pension actuary explained what the inflation rate means for civil servants after January 2013.
“Each time they are paid, they earn a new portion of the tax-free retirement capital and annuity related to their salary paid to them at retirement age (currently 66).
“But prior to retirement, those portions of the accumulated severance pay and pension (referred to in the legislation as “eligible amounts”) are increased year-over-year in line with inflation.”
He said people who are members of the scheme known as the Single Public Service Pension Scheme (SPSPS) saw a 5.5 percent increase in accrued pensions and lump sums late last year. This should reflect last year’s inflation rate.
“So if, for example, you had accumulated €10,000 pension in the SPSPS by the end of 2020, this will now be increased to €10,550.”
He said that with inflation continuing to rise, SPSPS members “can look forward with confidence to another significant increase in their accrued pensions and bonuses by this time next year, based on the inflation rate for 2022.”
According to the statistics office, the inflation rate was 6.7 percent in March. Many experts expect a further increase. And there is no cap or limit on inflation increases for pensions and lump sums in the legislation that underlies this system.
A spokesman for the Ministry of Public Expenditure and Reform said the unified public pension system (the unified system) was introduced in 2012.
It represents the most significant reform of public sector pensions since the creation of the state and will make a significant contribution to ensuring the sustainability of public sector pension bills in the future.
It is estimated that benefits under the scheme are worth about 35 percent less than existing public sector pension schemes.
The department said: “The unified system provides for increases in pensions and pensionable amounts in line with consumer price index (CPI) increases.”
https://www.independent.ie/business/personal-finance/pensions/inflation-is-boosting-the-pensions-of-200000-in-public-sector-41562293.html Inflation is driving up public sector pensions by 200,000