What the Court has recommended

The Labour Court has issued its final recommendation on the issue of comparable pensions for school secretaries and caretakers (a copy of the recommendation is available HERE).

The Court heard evidence over four successive hearings before reaching its decision, which makes clear that the phased auto-enrolment pension scheme is not comparable with the Single Public Service Pension Scheme. Therefore, in order to meet the terms of the agreement to suspend strike action last September, the Court has recommended that a Pension Gratuity be provided to bridge the gap between the value of the phased auto-enrolment scheme and the public service pension scheme.

The gap in pension benefits was identified from the age of 40 years onwards, due to the fact that staff would not have sufficient time to build up pension funds in the auto-enrolment scheme to ensure they receive benefits comparable to the public service scheme. The Court has set out a formula to deliver comparable pensions through the provision of the Gratuity, which would be available to all staff over the age of 40 years on the date the recommendation is accepted. The Gratuity calculation is based on a 10.5 year reference period from 2015 to the end of 2025.

How the gratuity will be calculated

All staff with full service from 2015 onwards would receive a maximum gratuity amount of €20,000, pro rata, depending on working hours.

In straightforward terms, this means that a full-time employee receives €20,000, while an employee on 60% of a whole time equivalent post (secretary working 22 hours 12 minutes / caretaker working 23 hours 24 minutes) per week receives €12,000, and an employee in a 50% of a whole-time-equivalent post (secretary working 18 hours 30 minutes / caretaker working 19 hours 30 minutes per week) receives €10,000.

The calculations are to be based on four weeks full-time-equivalent salary, capped at €600 (this is the current statutory redundancy pay limit) for 10.5 years (2015 to 2025) or €2,400 for each of the 10.5 years, with the payment capped at €20,000.

For those staff with less than 10.5 years’ service, the formula is based on actual years worked during the reference period. The gratuity would be paid tax free at point of retirement.

The Court states that, for staff below the age of 40, auto-enrolment will provide comparable benefits at point of retirement, based on Government and expert actuarial projections.

How comparability is achieved

While the public service pension system is based on two elements - the State Old Age Pension and the SPSS (Single Public Service Scheme) - the comparable offer for caretakers and secretaries is based on three elements:

1. The State Old Age Pension
2. The auto-enrolment pension and lump sum at retirement
3. The Gratuity, designed to bridge the gap with the public service scheme

No retrospection has been provided by the Court. The Court's recommendation states that the union side sought this, but it has not been provided, and it was vigorously opposed by the government side throughout the process.

The Gratuity amounts will increase when the statutory redundancy payment of €600 is increased. The last increase to that payment was in 2005. Likewise, the State Old Age Pension will also increase.

Example

One of the examples provided by the Court in the recommendation is as follows:

• Based on current values; A worker who worked the full 10.5 years between 2015 and 2025 and works 60% hours.
• €600 (or whatever the statutory cap is at the relevant time) x 4 weeks x 10.5 years = €25,200.
• Capped at ceiling of €20,000 x 60% = €12,000 ex gratia lump sum, to be calculated and payable at time of retirement at or after age 66.

This provides comparability, in respect of pension benefits, by providing an enhanced lump sum to offset the shortfall between auto-enrolment and the public service scheme.

Next steps for members

The decision to suspend strike action by caretakers and secretaries, on 5^th September last year, was taken once an agreement was reached to provide comparable pension benefits.

Throughout this lengthy process, government officials and expert advisors maintained that the auto-enrolment arrangements were comparable, and in some respects better, than the single public service pension scheme. The Court has rejected that position, and found that there is a shortfall, between the phased auto-enrolment scheme, and the annual pension and lump sums available to staff in the public service scheme.

The Gratuity does provide additional financial benefits for staff who are over the age of 40 years. The extent to which the expert actuarial opinion, on the value of the full auto-enrolment scheme, is accurate will need to be monitored closely in the forthcoming years. Staff who are over the age of 60 years, or who earn less than €20,000 per annum, can apply to join auto-enrolment if they wish to do so, in order to build up pension benefits before retirement.

Fórsa will now request the resumption of negotiations at the WRC, in order to address the remaining outstanding claims for the implementation of the agreed Caretaker Pay Structure, bereavement leave, sick leave and acute illness leave.

A pensions modeler, based on the Court’s formula, will be made available shortly, designed to enable members to see what their pension entitlements would be on retirement with the Gratuity in place.

A ballot of secretary and caretaker members will take place, as soon as negotiations on the remaining outstanding claims in the WRC are completed.

In the meantime, Fórsa will facilitate online meetings for members to explain how the Labour Court Recommendation will affect members individually.

Further illustrative examples are set out (click on EXAMPLES below) for reference only, in addition to a list of Frequently Asked Questions.