Updated 7.30pm

CHANGES TO PUBLIC service pensions in Ireland will cut €1.8 billion a year from the State pensions bill according to the government which unveiled plans for reform today.

The changes, announced today by the Minister for Public Expenditure and Reform Brendan Howlin, are to be applied to all new entrants into the public service, who will have their pension calculated on a career average basis rather than on the current final salary at the time of retirement.

The changes have already been criticised by one union.

Under the Public Service Pensions (Single Scheme) and Remuneration Bill 2011, public sector pensions will be linked to the consumer price index rather than the pay of the grade which the person retiring has just left.

A maximum retirement age of 70 is to be implemented.

While the age at which a person can receive a pension will initially be raised to 66 to bring it into line with the social welfare state pension age and it will then rise on a phased basis to 67 and then 68.

Howlin has described the changes as “a far-reaching transformation of the public service pension system,” adding:

This is a fairer approach to pensions; your pension reflects your career average earnings as opposed to your final salary.

The changes have been criticised by the Irish National Teachers’ Organisation (INTO) which said the Bill would force future teachers to pay more into their pensions than they will get out.

“This will mean in effect new teachers will fund the full cost of their pensions,” a statement said adding that the claim of savings of €1.8 billion were “highly speculative”.

The Fianna Fáil spokesperson for public expenditure and reform, Seán Fleming, said the changes had some pitfalls and noted it would be decades before a proper judgement could be made:

“The new single pension scheme for the public service is good in principal but it will be at least 40 years before we know if it is actually good in practice,” he said.

The changes apply across the public sector with new employees in the civil service, education sector, health sector, local authorities, Gardaí, Defence Forces, the regulatory sector and non-commercial semi state bodies all subject to the new rules.

As for the President, Oireachtas members, the Judiciary and the Attorney General and others who earn accelerated pension benefits, the new scheme will provide a doubled rate of accrual together with a doubled rate of contribution of 13 per cent for all new entrants.

Reducing the salary of the judiciary will be the subject of a referendum next month.

The President will continue to receive a pension on retirement from office while anyone who is or was an Oireachtas member prior to the enactment of the Bill retains those benefits and scheme membership if there is a break in their Oireachtas tenure.

The government added that the measure is part of proposals agreed under the EU/IMF bailout programme.