ALL new entrants to the public sector face the prospect of losing the traditionally generous defined benefit pension under a radical plan being considered by the government that would save the exchequer billions of euro in pension contributions.

The plan, which would see new recruits being shifted to less generous defined contribution pension schemes commonplace in the private sector, would prove controversial with the public sector unions.

They regard defined contribution pensions as 'yellow pack', because the final pension is dependent on investment returns, compared to defined benefit arrangements, where the employer, in this case the government, takes all the risk. The plans do not seek to alter in any way the pension entitlements of current workers or those already retired.

A series of options to deal with the escalating cost of public sector pensions has been outlined to ministers. One of the key proposals is that new entrants to the public sector, starting two years from now, would no longer have access to the defined benefit pension scheme currently offered to Ireland's 357,000 public sector workers. To help sell the new
pensions, the government is considering a state guarantee of a certain minimum investment return.

The Sunday Tribune has also learned that the government is giving consideration to a new tax rate or levy on high earners as part of the upcoming budget. Last January, just before the unions walked out of the talks because of the public sector pension levy, the government put a proposal on the table to have a new 5% levy on those earning in excess of €250,000-€350,000.

The proposal was parked when the talks broke down, but with the unions now back for discussions, it is understood fresh consideration is being given to an additional levy. A new super rate is expected to be at least five percentage points higher than the current top rate of tax, which is also likely to be raised in the upcoming budget.

Ministers have already made a decision to effectively freeze the National Development Plan. Agreement has been reached at cabinet that all projects already signed off on will be completed but there will be no new approvals. The move is likely to save hundreds of millions of euro this year and raises serious question marks about some high-profile infrastructure projects.

It is not clear yet whether ministers will agree to include the idea of a change in pension arrangements in the final budget speech. A spokesman for the Department of Finance declined to comment.