COSTS of benefits coupled with increases in salaries and pensions as well as the constant rise in the number of government workers are the main factors that have seen state expenditure grow, a study into state pensions suggests.
General pay rises are also extended to pensions and in many cases they are retroactive, the study said.
The study, undertaken on behalf of the government by actuarial firm Muhanna, said the government last year paid almost €482 million, or 2.8 per cent of GDP, in state pensions, bonuses and contributions to the social insurance fund.
Civil servants contribute around half of what private sector workers do to the social insurance fund, with the remainder footed by the state.
They also receive a government pension towards which they do not contribute anything during their working life.
The government had ordered the study as part of its effort to reform the unsustainable state pensions system – a structural problem of the economy often raised by ratings agencies and other organisations.
The study has been presented to unions, parties and employers’ associations who are expected in the coming days to get into the nitty-gritty of the problem in discussions with the finance ministry.
Apart from the apparent inequalities of the system, Muhanna also listed a series of other factors that raise costs or create distortions.
Included in these are the varying mandatory retirement categories in various sectors of the government. For some, the mandatory age is lower than 63 – the retirement age of most workers.
Teachers retire at 60 and police officers between 60 and 61. For army officers the age of retirement ranges between 52 and 60 depending on position and rank.
The study also notes the issue of early retirement as a contributing factor to the problem.
Early retirement is allowed in all sectors without however a cut in pension.
“A civil servant is allowed to retire from the age of 58 with the same conditions as retirement at 63,” the study said. “As a result, pension will be paid for more years.”
Muhanna also pointed out the practice of promoting someone just before retirement so that they can receive a higher pension.
Calculation of pension benefits takes into consideration the last salary.
It also notes that expense allowances for some high-ranking state officials are pensionable – effectively meaning they receive a pension “part of which concerns revenues related with an allowance paid exclusively for exercising particular duties.”
