Opinion of the European Central Bank of 26 January 2012 on pension reforms in the public sector (CON/2012/6)
Date: 2012-01-26
Institutions: European Central Bank
Subjects: Ireland, national law, pension scheme, public service employee, retirement conditions

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 26 January 2012 

on pension reforms in the public sector 

(CON/2012/6) 

Introduction and legal basis 

On 20 December 2011, the European Central Bank (ECB) received a request from the Irish Minister for 

Public  Expenditure  and  Reform  for  an  opinion  on  two  drafts  laws  which  amend  the  current  and  future 

pension  arrangements  for  public  servants  in  Ireland:  the  Financial  Emergency  Measures  in  the  Public 

Interest  (Amendment)  Bill  2011  (hereinafter  the  ‘FEMPI  draft  law’)  and  the  Public  Service  Pensions 

(Single Scheme) and Remuneration Bill 2011 (hereinafter the ‘PSPR draft law’).   

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and the third indent of Article 2(1) of Council Decision 98/415/EC of 

29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft law relates to the Central Bank of Ireland (CBI). In accordance with 

the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing 

Council has adopted this opinion.  

1. 

Purpose of the draft laws 

1.1  PSPR draft law 

The  PSPR  draft  law  will  create  a  new  single  public  service  pension  scheme  (hereinafter  the 

‘Scheme’)  for  newly  recruited  public  servants.  The  ECB  understands  that  the  Scheme  will  not 

affect existing public servants, who will remain members of their current sector-specific schemes. 

The ECB further understands that the features of the Scheme include a career-based average rather 
than final salary basis for pension awards2, the adjustment of accrued benefits and pensions in line 
with inflation rather than remuneration3 and a higher minimum pension age4. The Scheme is one of 

the  commitments  under  the  financial  assistance  programme  agreed  between  the  Minister  for 

Finance, the European Commission, the ECB and the International Monetary Fund, to implement 

1  
2  
3  
4  

OJ L 189, 3.7.1998, p. 42. 
Section 19 of the PSPR draft law. 
Section 39 of the PSPR draft law. 
Sections 13 and 14 of the PSPR draft law. 

 
 
 
 
                                                      
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fiscal  consolidation  and  expenditure  reduction  in  public  finances5.  The  PSPR  draft  law  provides 

that the Scheme will apply to newly appointed public servants of ‘public service bodies’. The CBI 

is included in the definition of ‘public service body’, but the PSPR draft law stipulates that future 

CBI staff may only be members of the Scheme to the extent provided for in a written consent to the 

Minister by the CBI’s Governor and by the Minister for Finance.  

1.2  FEMPI draft law 

The  FEMPI  draft  law  will  amend  the  Financial  Emergency  Measures  in  the  Public  Interest 

Act 2009 (hereinafter the ‘2009 Act’) and the Financial Emergency Measures in the Public Interest 

(No 2)  Act  2009  (hereinafter  the  ‘2009  No  2  Act’),  which  reduced  the  remuneration  of  certain 

public servants, including CBI staff. These amendments mainly extend the reductions to members 

of the judiciary, following a  recent constitutional  referendum. The FEMPI draft law also amends 

the  Financial  Emergency  Measures  in  the  Public  Interest  Act  2010  (hereinafter  the  ‘2010  Act’), 

which reduced the pensions of certain public servants. The 2010 Act included the CBI within the 

definition of ‘public service body’ to which the pension reductions were to apply. The FEMPI draft 

law  amends the  2010 Act  so that the CBI’s  Governor,  along with  the  Minister for  Finance,  must 

consent in writing to the Minister before the pension reduction may be applied to CBI pensioners. 

The  2009  Act,  the  2009  No  2  Act  and  the  2010  Act  were  introduced  in  the  context  of  the 

stabilisation of public finances in Ireland. 

2. 

Observations on the PSPR draft law 

The  ECB  notes  that  the  PSPR  draft  law  has  potential  implications  for  the  CBI’s  financial 

independence, in particular its autonomy in staff matters, which is part of the principle of central 

bank  independence  under  Article  130  of  the  Treaty.  Autonomy  in  staff  matters  extends  to  issues 

relating  to  staff  pensions.  As  stated  in  the  ECB  Convergence  Report  2010  and  several  ECB 
opinions6 on issues concerning autonomy in staff matters, the principle of financial independence 

requires that a Member State does not impair the ability of its central bank to employ and retain the 

qualified  staff  necessary  to  perform  independently  the  tasks  conferred  on  it  by  the  Treaty,  the 

Statute of the European System of Central Banks and of the European Central Bank  (hereinafter 

‘the  Statute  of  the  ESCB’)  and  national  legislation.  In  addition,  a  Member  State  may  not  put  its 

NCB in a position where it has limited or no control over its staff, or where the Government of that 

Member State can influence its policy on staff matters.  

As already stated in ECB Opinion CON/2009/15 on the draft 2009 law, the ECB reiterates that to 

protect the CBI’s autonomy in staff matters, the Irish authorities are under an obligation to ensure 

5  

6  

See Ireland Memorandum of Understanding on specific economic policy conditionality,  28.11.2011, p. 3, available on 
the Commission’s website at www.ec.europa.eu. 
See  Opinions  CON/2008/9, CON/2008/10,  CON/2009/15,  CON/2009/45,  CON/2009/47,  CON/2010/42,  CON/2010/51, 
CON/2010/56, CON/2010/58, CON/2010/59, CON/2010/69 and CON/2010/80. All ECB opinions are published on the 
ECB’s website at www.ecb.europa.eu. 

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that the Scheme’s application to future CBI staff is decided by the Irish authorities in cooperation 
with  the  CBI7,  taking  due  account  of  the  CBI’s  views,  and  such  cooperation  must  ensure  the 

ongoing  ability  of  the  CBI  to  perform  independently  the  tasks  conferred  on  it  by  the  Treaty,  the 

Statute of the ESCB and national legislation. The ECB welcomes section 6(1)(a) of the PSPR draft 

law,  which  provides  that  the  Scheme  will  only  apply  to  the  CBI  ‘to  the  extent  provided  for  in  a 

consent, given in writing to the Minister by the Governor of that Bank’. Such wording would allow 

the Governor, on behalf of the CBI, to take into account the particularities of the CBI’s own legal 

framework and special legal regime and any other relevant considerations, in particular obligations 

arising under the Treaty, in formulating the form and extent of the Governor’s consent or dissent to 

the application of the Scheme to future CBI staff. Moreover, assuming that the Governor’s consent 

has been given, the consent should be required also in the future when there is a significant change 

to  the  consented  Scheme  to  ensure  the  ongoing  ability  of  the  CBI  to  perform  independently  the 

tasks conferred on it by the Treaty, the Statute of the ESCB and national legislation. 

The ECB understands that section 30(1)(a) of the PSPR draft law indicates that the calculation and 

payment of any pension benefits under the Scheme to future CBI staff will be a function of the CBI 

on  the  Governor’s consent.  The ECB would welcome clarification in the PSPR  draft  law that, in 

this  context,  the  term  ‘function’  means  that  the  CBI  will  in  the  first  instance  be  responsible  for 

funding, calculating and paying pension benefits to future CBI staff to the extent of the Governor’s 

consent. 

The ECB understands that section 16(4) and 16(5) provides that the Minister may require the CBI 

to make contributions to the Scheme in respect of its Scheme members and that such contributions 

will  be  paid,  and  collected  and  disposed  of  for  the  benefit  of  the  Exchequer,  by  the  CBI  in  such 

manner  as  the  Minister  may  direct.  The  ECB  further  understands  that  the  Minister  may  recover 

amounts due from the CBI where the CBI fails to dispose of such contributions in accordance with 

the Minister’s directions under section 16(5) and that Minister may apply to the High Court for an 

order directing the CBI to (i) comply with the Minister’s or the Court’s directions, and (ii) make 

good  any  shortfall  in  contributions  collected.  To  ensure  full  compliance  with  the  prohibition  on 
monetary  financing  under  Article  123  of  the  Treaty8  and  the  CBI’s  financial  independence,  the 

ECB would welcome clarification in the PSPR draft law that (i) in no event will CBI resources be 

applied  towards  the  funding  or  payment  of  pension  contributions  or  benefits  for  future,  non-CBI 

public  servants  under  the  Scheme,  and  (ii)  the  CBI  will  in  no  event  assume  or  finance  any 

obligations  of  any  other  public  service  body  or  the  Minister  in  relation  to  such  pension 

contributions or benefits for future, non-CBI public servants under the Scheme. 

7  
8  

See also paragraph 3.2.2 of ECB Opinion CON/2010/80 which establishes the parameters of an effective cooperation.  
Further clarified in Council Regulation EC (No) 3603/93 of 13 December 1993 specifying definitions for the application 
of  prohibitions  in  Article  104  and  104b(1)  of  the  Treaty  (OJ  L  332,  31.12.1993,  p.  1),  according  to  which  overdraft 
facilities or any other type of credit  facility with the ECB or  the national central banks of  Member States  in  favour of 
Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed 
by  public  law,  or  public  undertakings  of  Member  States  are  prohibited,  as  is  any  purchase  directly  from  these  public 
sector entities by the ECB or national central banks of debt instruments. 

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3. 

Observations on the FEMPI draft law 

The  2010  Act  aimed  at  reducing  public  service  pension  costs  by  introducing  the  Public  Service 

Pension  Reduction  (hereinafter  the  ‘PSPR’).  It  imposed  from  1 January  2011  a  progressively-

structured  levy-type  imposition  on  Irish  public  service  pensions  greater  than  EUR  12  000  per 

annum. The CBI was included within the definition of ‘public service body’ in the 2010 Act and 

therefore  the  PSPR  was  intended  to  apply  to  CBI  pensioners  in  the  same  way  as  public  service 

pensioners generally. Section 8 of the FEMPI draft law will amend this provision so that the PSPR 

will only apply to the CBI with the written consent to the Minister by the Governor of CBI and the 

Minister for Finance. The Minister must then publish a notice that such consents have been given 

and  stating  the  date  from  which  the  2010  Act  (and  consequently  the  PSPR)  will  apply  to  CBI 

pensioners. 

As referred to under 2 above, to protect the CBI’s autonomy in staff matters, any pension-related 

deductions  applicable  to  the  officers  and  employees  of  the  CBI  in  view  of  the  current  difficult 

economic  circumstances  should  be  decided  in  cooperation  with  the  appropriate  decision-making 

bodies of the CBI taking due account of their views. As in the case of the PSPR draft law, the ECB 

welcomes the requirement for a specific ‘consent’ from the CBI before the PSPR will apply to CBI 

pensioners.   

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 26 January 2012. 

[signed] 

The Vice-President of the ECB 

Vítor CONSTÂNCIO 

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