IT HAS EMERGED today that as many as 50 – or more – senior civil servants could be in line for pensions as big as that paid to Dermot McCarthy, the former Secretary General at the Department of the Taoiseach.
The Irish Independent said today it believed that as many as 55 senior civil servants were entitled to similarly huge severance payments worth over €600,000.
These payments will be smaller if the staff retire after the end of February, after which they will be subject to taxation under measures introduced in the 2011 Budget – meaning staff will have to indicate plans to retire before the end of November if they are to receive them.
While the Programme for Government commits to capping pension arrangements for future civil service appointments at €60,000, the arrangements for staff already employed cannot be changed – meaning that if senior staff try to retire before November, they can guarantee the massive retirement packages.
So how are these pension arrangements arrived at – and how can someone on a certain salary end up with a pension package worth several times that much?
The pension paid to McCarthy – who will receive €713,352 in the first twelve months after his retirement a few weeks ago – is largely based on the same regulations introduced by politicians to govern their own infamously large pension pots.
Under those regulations – which kicked in for many former TDs when they lost their seats in February’s general election – TDs or civil servants are entitled to three years’ worth of their pension in a lump sum upon retirement.
Similarly, the pension entitlements of each increase over time – and by the time a civil servant has accrued 40 years’ service (or 20 in the case of TDs and Senators), their annual pension is the equivalent of exactly half their gross annual pay.
The only main difference between the two is in terms of their termination lump sum. As the letter furnished to RTÉ News this week outlined, McCarthy was paid €142,670.50 (the equivalent of six months’ full salary) in a ‘special severance payment’.
In a politician’s case, this severance payment is slightly lesser – with TDs instead put on a sliding scale of individual monthly repayments for up to 12 months after they leave.
In another similarity with politicians, the pensionable salary is actually higher than the salaries actually paid – while public and civil servants had their pay cut a few years ago, staff retiring this year earn pensions based on their pre-cut levels.
So in McCarthy’s case – and the case of several dozen other senior civil servants – he earns a pension based on his peak salary of €285,341, even though his wage was cut in 2009.
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