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Dublin: 13 °C Thursday 23 October, 2014

Column: How much does each TD actually cost the State?

The annual pay of ministers and TDs doesn’t come close to recognising the true financial cost of hiring them, writes Sarah O’Neill.

Sarah O'Neill

THE PROPOSAL to cut Ministerial and TDs’ salaries as part of the planned Croke Park II deal is a welcome development – but when all entitlements and provisions are added up, our political representatives are still costing the State an exorbitant amount annually.

The total, long-term cost to the Exchequer of providing a TD’s or Senator’s pension is drastically under-estimated in figures representing politicians’ pay. A truly accurate representation of the full cost of the current scheme must consider the contribution the State makes towards a notional pension fund on behalf of each TD.

In the case of all other public sector jobs, an individual is entitled to a full pension after they have worked for 40 years. Assuming an individual does not choose to retire early, their annual pension entitlement upon retirement is calculated by dividing their salary by 80 and multiplying by the number of years they have worked – 40 in the case of a lifelong worker.

However as outlined here, our TDs and Senators are entitled to claim a full pension after 20 years of service – and those in a ministerial position after only two years. This means that our politicians are accumulating a pension at a degree that is at least twice the normal rate of equivalent grade civil service employees.

The implications of this in terms of annual government spending are enormous. In order to provide for each current and former representative’s pension, the Government must have in place a pension fund that is 40 times the annual pension payout to each serving and retired Deputy.

(This 40 figure is based on an actuarial calculation of the amount of the pension pot required to generate an annual pension worth €x – i.e one would require 40x in the notional pension pot, irrespective of how long the recipient might live.)

Each TD’s pension fund? €1.85 million

To provide an individual with the average TD pension of €46,336, for example, therefore requires the Government to finance a pension fund of €1,853,440.

Each TD contributes 6 per cent of their annual pay to their pension, which translates into around €5,560. This is a recent addition which does not apply to those who retired at the last election.

The cost of this €1,853,440 is then spread across the full 20-year term of the TD, and paid into a pension fund in annual notional pension contributions amounting to €92,672 for each TD every year.

In addition to salary and allowances, the cost of maintaining each of our current representatives is shocking in the national context of economic austerity and sacrifice.

Total cost of average TD in the Dáil:
Annual Salary (before Croke Park II): €92,672
Notional annual contribution to pension fund: €92,672
Travel and accommodation allowance (up to): €37,850
Public Representation Allowance: €23,130
Average staff costs (parliamentary assistant + secretarial assistant): €69,000
TD’s contribution: (€5,560)
Total annual cost of each TD to the state: €309,912

Upon retirement, each TD who has served longer than 20 years is furthermore entitled to claim a retirement lump sum of €139,008, a termination lump sum of €15,445, and 12 monthly ‘Termination Payments’ for the first year of retirement, calculated according to number of years of service and amounting to up to a maximum annual payment of €57,920.

Only after all of that does the Deputy’s annual pension officially begin.

The total cost of an average minister

There are currently 15 cabinet ministers and 14 ‘junior’ ministers of state in government. Each is entitled to claim a ministerial pension – to some degree – after only two years of service. (For those who have served the full term of this Dáil, the two-year period is fulfilled on March 9 and 10.)

This pension is calculated as 20 per cent of their annual ministerial salary after two years, and increases by 5 per cent for each year of additional service thereafter up to a maximum of 60 per cent after 10 years. This is in addition to their normal TD’s pension.

The full pension each minister is entitled to, as laid out below, is made up of both parliamentary and ministerial pensions, and amounts to €92,298 annually. It is subject to the same pension fund requirements as TDs and Senators, except that the full ministerial pension is accumulated over 10 years – as opposed to 20 years in the case of TDs and Senators, and 40 years for the typical civil servant.

This means that if the Government was to finance ministerial pensions like any private sector pension fund, they would need to finance a fund of around 40 times this annual payment – amounting to a pension fund provision of an incredible €3,691,920 for each Minister who has served for over 10 years.

Annual Salary (before Croke Park II): €169,275
Notional annual contribution to pension fund: €276,520
Secretarial Allowance for the purchase of PR & secretarial assistance (up to): €41,900
Public Representation Allowance: €20,000
Dual Abode Allowance (income tax break for Ministers from outside of Dublin with second home in capital): €6,500
Average staff costs (parliamentary assistant + secretarial assistant): €69,000
Contribution to TD pension: (€5,560)
Total annual cost of each Minister to the state: €577,635

These figures apply to ‘ordinary’ cabinet ministers only – ministers of state cost the Exchequer less and Cabinet ministers, particularly the Taoiseach and Tánaiste, will cost more.

It is worth noting that there are also various allowances which some members with certain roles such as Party Whip are entitled to. These range from €3,000 – €76,603 a year and must also be accounted for in an analysis of how much office-holders cost the Exchequer.

Cabinet ministers are also entitled to claim for two special advisors, who earn a salary roughly equivalent to that of a TD.

First thing to change

This web of entitlements is difficult to represent and not presented to the public in a transparent, centralised format.

In a political environment of late-night Dáil sittings and economic uncertainty, trust and faith in our leaders is fundamental to the successful implementation of the reforms necessary to rebuild our state.

The promissory note deal was important for the credibility of the coalition, but it did not free us from the financial predicament we find ourselves in. Outlandish pension entitlements are indicative of a dysfunctional and out-of-touch political system – and should be first on the agenda when it comes to expenditure cuts.

A couple of months ago, Leo Varadkar was quoted in the Irish Times as saying: “I think pension reform is long overdue. People in the public service have very secure pensions but it is not at all clear that we will be able to fund them in the future.”

Indeed, and what better way than to lead by example.

Sarah O’Neill is a TCD student and founder of Dailwatch.ie, a non-profit, politically neutral platform for direct, public Q&A between citizens and TDs.

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