Opinion of the European Central Bank of 24 November 2017 on pay and pension provisions (CON/2017/49)
Date: 2017-11-24
Institutions: European Central Bank
Subjects: Ireland, central bank, national law, pay, pension scheme, public service employee

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 November 2017 

on pay and pension provisions 

(CON/2017/49) 

Introduction and legal basis 

On 10 November 2017 the European Central Bank (ECB) received a request from the Irish Minister for 

Public  Expenditure  and  Reform  for  an  opinion  on  the  Public  Service  Pay  and  Pensions  Bill  2017 

(hereinafter the ‘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/EC1, 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 law 

1.1  The draft law further restores the basic salaries of public servants, including both employees and 

officer  holders  of  the  CBI,  which  were  reduced  under  the  Financial  Emergency  Measures  in  the 

Public Interest (FEMPI) Acts of 2009,  2011 and 2013. Moreover, it provides for the restoration of 

pensions payable to public service pensioners, including current and former employees and office 

holders of the CBI, through the phased further amendment of the public service pension reduction. 

It  also  converts  the  pension-related  deduction  into  a  permanent  additional  superannuation 

contribution  for  all  public  servants,  including  employees  and  office  holders  of  the  CBI,  who  are 

members  of  a  public  service  pension  scheme  or  receive  a  gratuity  in  lieu  of  a  public  service 

pension scheme.  

1.2  Part 1 of the draft law (Preliminary and General) repeals the Financial Emergency Measures in the 

Public Interest  Act 2009 (hereinafter the ‘2009 Act’) on 1 January 2018 and clarifies that the repeal 

of certain sections of that Act will come into operation on 1 January 2019. Part 1 of the draft law 

also defines what is meant by the terms ‘covered public servant’ and ‘non-covered public servant’. 

Where  a  recognised  trade  union  or  staff  association  has  not  notified  the  Workplace  Relations 

Commission,  in  writing,  of  its  assent  to  be  bound  by  the  terms  of  the  Public  Service  Stability 

Agreement 2018-2020, then public servants who are members (and in certain limited cases public 

servants  who  are  not  members)  of  that  trade  union  or  staff  association  are  considered  ‘non-

1  

Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

 
 
 
 
                                                 
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covered  public  servants’  for  the  purposes  of  the  draft  law.  This  distinction  is  relevant  due  to  the 

difference in the extent of the pay restoration applied to the respective categories of public servant. 

1.3  Part 2 of the draft law (Remuneration – Public Servants Generally) clarifies the amount and timing 

of incremental increases to the annualised amount of the basic salary of covered and non-covered 

public servants respectively, starting from 1 January 2018 and continuing to 2021. It also provides 

for  the  completion  of  pay  restoration  by  Ministerial  order,  which  must  be  completed  on  or  before 

July 2021 for public servants with a basic salary of less than EUR 150 000, and must be completed 

on or before July 2022 for public servants with a basic salary of more than EUR 150 000. The draft 

law also provides the Minister for Public Expenditure and Reform with powers to correct anomalies 

that may result from the draft law, by increasing the basic salary applicable. Finally, the draft law 

provides  that  until  31  December  2021,  no  increment  will  be  awarded  to  a  non-covered  public 

servant, and the operation of the pay scale that applies in respect of a non-covered public servant 

will be suspended. A public servant is defined, by reference to the meaning in the 2009 Act, as a 

person who is employed by, or who holds any office or other position in, a public service body. The 

CBI is explicitly defined as coming within the meaning of ‘public service body’. It follows, therefore, 

that the 2009 Act and the draft law apply to both employees and office holders of the CBI. 

1.4   Part 3 of the draft law (Public Service Pension Reduction) eliminates or lowers the public service 

pension  reduction  by  amending  the  Financial  Emergency  Measures  in  the  Public  Interest 

(Amendment)  Act  2010  (hereinafter  the  ‘2010  Act’).  This  is  achieved  by  incrementally  increasing 

the exemption threshold for pensioners who retired on or before 29 February 2012 depending on 

the  annualised  amount  of  their  respective  public  service  pensions.  Likewise,  the  public  service 

pension  reduction  liability  is  reduced  for  public  servants  who  retired  after  29  February  2012,  by 

decreasing the band-specific reduction rates. Public service pensions are defined under the 2010 

Act  as  including  pensions  payable  to  or  in  respect  of  a  public  servant  or  former  public  servant 

under  a  public  service  pension  scheme.  Public  servants  are  defined  for  this  purpose  as  persons 

who are employed by, or who hold any office or other position in a public service body, including 

the CBI, and include an office holder. Both current and former employees and office holders of the 

CBI therefore come within the scope of application of the 2010 Act, and thus also the draft law. The 

Financial Emergency Measures in the Public Interest (Amendment) Act 2011 (hereinafter the ‘2011 

Act’) amended the 2010 Act by introducing a provision pursuant to which the 2010 Act applies in 

respect  of  employees  and  office  holders  of  the  CBI  only  with  its  consent,  given  in  writing  to  the 

Minister  for  Public  Expenditure  and  Reform  by  the  CBI’s  Governor,  and  with  the  consent  of  the 

Minister for Finance. 

1.5   Part 4 of the draft law (Additional Superannuation Contribution) introduces a permanent additional 

superannuation  contribution  for  all  public  servants  who  are  members  of  a  public  service  pension 

scheme or receive a gratuity in lieu of a public service pension scheme. This replaces the pension-

related  deduction  which  was  introduced  by  the  2009  Act  to  deduct  certain  amounts  from  the 

salaries of persons in the public service who are members of an occupational pension scheme or 

pension  arrangement.  Part  4  outlines  details  of  the  contributions  payable  by  covered  and  non-

covered  public  servants  respectively  for  2019,  2020,  2021  and  subsequent  years.  The  draft  law 

empowers the Minister for Public Expenditure and Reform to make regulations for the purposes of 

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the calculation, making, collection, disposal and recovery of the contribution, and provides that the 

contributions must be paid into, or disposed of for the benefit of the Exchequer in accordance with 

the directions of the Minister for Public Expenditure and Reform or otherwise paid or disposed of as 

that Minister may direct. For the purposes of Part 4 of the draft law, public servants are defined by 

reference to the meaning in the 2009 Act, as persons who are employed by, or who hold any office 

or other position in a public service body, including the CBI, and include an office holder. A public 

service  pension  scheme  is  defined  as  a  pre-existing  public  service  pension  scheme,  the  single 

public  service  pension  scheme,  or  any  other  pension  scheme  or  arrangement  certified  by  the 

Minister for Public Expenditure and Reform as being such a scheme. By virtue of these definitions, 

employees and office holders of the CBI come within the scope of application of the 2009 Act, and 

thus  also  the  draft  law.  However,  the  draft  law  sets  out  that  Part  4  will  apply  to  the  officers  and 

employees of the CBI only to the extent provided for by written consent from the CBI’s Governor to 

the Minister for Public Expenditure and Reform, and with the consent of the Minister for Finance. 

2. 

Central bank independence 

2.1  Currently, the CBI enjoys statutory autonomy in determining its staff policy, including remuneration, 

with the CBI’s officers and employees subject to individual employment contracts and to collective 

bargaining  agreements  entered  into  between  the  CBI  and  staff  representative  groups.  The 

measures provided for in the draft law, as is the case of the 2009 Act and the 2010 Act, represent a 

departure from that regime insofar as the provisions proposed are to be imposed unilaterally. 

2.2  As the draft law applies to and directly affects the CBI’s decision-making bodies and its employees, 

it  should  be  examined  from  the  perspective  of  central  bank  independence  requirements  under 

Article 130 of the Treaty, in particular institutional and financial independence, as well as that of the 

personal independence of the members of the CBI’s decision-making bodies. It is worth noting that 

the  draft  law  continues  the  phased  reversal  of  the  provisions  of  the  five  FEMPI  Acts  introduced 

between  2009  and  2013,  further  to  the  Financial  Emergency  Measures  in  the  Public  Interest 
(Amendment) Act 2015, on which the ECB has already opined2, by reversing the remuneration and 

pension  reductions  for  public  servants  and  by  replacing  the  pension-related  deduction  with  an 

additional superannuation contribution. 

2.3  The principle of central bank independence as enshrined in Article 130 of the Treaty prohibits third 

parties, including the governments of the Member States, from issuing instructions to the national 

central  banks  (NCBs).  In  addition,  the  principle  of  central  bank  independence  means  that  third 

parties  may  not  influence,  directly  or  indirectly,  an  NCB  in  the  performance  of  its  tasks  or  as 

regards  its  ability  to  fulfil  its  mandate:  both  operationally  in  terms  of  manpower,  and  in  terms  of 
appropriate financial resources3. 

2  

3  

See Opinions CON/2009/15, CON/2012/6, CON/2013/46 and CON/2015/44. All ECB opinions are published on the 
ECB’s website at www.ecb.europa.eu. 

See, for example, the ECB’s Convergence Report 2016, p. 28, and paragraph 6 of Opinion CON/2012/89. 

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Financial independence 

2.4   Member States may not impair an NCB’s ability to employ and retain the qualified staff necessary 

for the NCB to perform independently the tasks conferred on it by the Treaty and the Statute of the 

European System of Central Banks and of the European Central Bank (hereinafter referred to as 

the ‘Statute of the ESCB’). Furthermore, an NCB may not be put into a position where it has limited 

control  or  no  control  over  its staff,  or  where  the  government  of  a  Member  State  can  influence  its 

policy  on  staff  matters.  To  protect  autonomy  in  staff  matters,  the  ECB  has  consistently 

recommended  in  previous  opinions  and  in  its  convergence  reports  that  any  amendment  to 

legislation  on  remuneration  for  members  of  an  NCB’s  decision  making  bodies  and  its  employees 

should be decided in close and effective cooperation with the NCB, taking due account of its views, 

to  ensure  the  ongoing  ability  of  the  NCB  to  independently  carry  out  its  tasks.  Autonomy  in  staff 
matters extends to issues relating to staff pensions4. Further, amendments that lead to reductions 

in the remuneration for an NCB's staff should not interfere with that NCB’s powers to administer its 
own financial resources, including the funds resulting from any reduction in salaries that it pays5. 

2.5  Given  that  the  CBI’s  employees  are  employed  under  the  conditions  (including  conditions  as  to 
remuneration  and  allowances)  set  by  the  Central  Bank  Commission6,  legislative  provisions 

affecting the remuneration of members of the CBI’s decision-making bodies and employees should 

be drafted in close and effective cooperation with the CBI in order to protect the CBI’s autonomy in 
staff matters7. 

2.6   As regards the provisions on the public service pension reduction applicable to the CBI’s officers 

and  employees,  the  ECB  notes  that  Section  1A  of  the  2010  Act,  as  inserted  by  the  2011  Act, 

required the Minister for Public Expenditure and Reform to obtain the written consent of the CBI’s 

Governor in respect of reductions to pensions of former CBI employees and office holders, and that 

this consent was granted.  

2.7  As regards the provisions on the additional superannuation contribution, the proposed contributions 

may be subject to regulations of the Minister for Public Expenditure and Reform for the purposes of 

calculating, making, collecting, disposing of and recovering the contribution, and must be paid into, 

or  disposed  of  for  the  benefit  of  the  Exchequer.  Thus,  the  additional  superannuation  contribution 

under the draft law would be payable by the CBI’s officers and employees to the Exchequer. In this 

regard, the draft law does not appear to reflect the distinctive features of the CBI’s superannuation 
scheme8, which is not connected to other State public service pension schemes. In particular, the 

CBI is required to establish a trust fund for holding contributions made to the scheme and for the 
payment  of  superannuation  benefits  under  the  scheme9.  The  ECB  understands  that  the  CBI  is 

required to transmit all contributions collected from the members of the scheme to the trustees, and 

4  
5  
6  

7  
8  

9  

See the ECB’s Convergence Report 2016, p. 28 and the reference to ECB opinions made there. 
See Opinions CON/2015/8 and CON/2015/57. 
See section 6D of the Central Bank of Ireland Act 1942, as inserted by section 14 of the Central Bank Reform Act 
2010. 
See also Opinion CON/2012/89 and paragraph 2.6 of Opinion CON/2013/41. 

Under  Section  33AG(2)  of  the  Central  Bank  Act  1942,  the  CBI  may  establish  and  operate  one  or  more 
superannuation schemes under which superannuation benefits are payable on the retirement or death of persons. 
However, such a scheme does not take effect until it has been approved by the Minister for Finance.  

See Section 33AG(4) of the Central Bank Act 1942.  

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is  required  to  pay  to  the  trustees  any  monies  which  the  CBI,  after  consulting  an  actuary,  deems 
appropriate  for  adequately  funding  the  CBI’s  superannuation  scheme  over  time10.  The  ECB 

understands  that  the  Exchequer  plays  no  role  in  financing  the  CBI’s  trust  fund,  and  all  pension 

benefits  for  the  CBI’s  officers  and  employees  are  paid  out  of  this  trust  fund.  Thus,  if  such 

contributions  are  payable  by  the  CBI’s  officers  and  employees  to  the  Exchequer,  this  may  be 

regarded as a form of taxation on the CBI’s officers and employees and may raise concerns with 

regard to the CBI’s financial independence. 

2.8   The ECB notes that the draft law requires the Minister for Public Expenditure and Reform to obtain 

the written consent of the CBI’s Governor in respect of the application of Part 4 of the draft law to 

the officers and employees of the CBI. Thus, the consent of the CBI’s Governor must be obtained 

before  the  Minister  can  impose  the  obligation  on  the  CBI’s  officers  and  employees  to  pay  the 

additional  superannuation  contribution.  This  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 this Part 

of  the  draft  law.  Moreover,  assuming  that  the  Governor’s  consent  has  been  given,  the  consent 

should  also  be  required  in  the  future  if  there  is  a  change  to  the  additional  superannuation 

contribution 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.  

Personal independence of members of the CBI’s decision-making bodies 

2.9   Finally,  Member  States  may  not  seek  to  influence  the  members  of  an  NCB’s  decision-making 

bodies by amending national legislation affecting their remuneration. Such legislation, as a matter 
of principle, should apply only in respect of future appointments11. The draft law applies not only to 

the  CBI’s  decision-making  bodies  but  also  more  generally  to  all  public  servants  in  Ireland  who 

come  within  its  scope  and,  as  such,  does  not  seek  directly  or  indirectly  to  influence  the  CBI’s 

decision-making  bodies  in  the  performance  of  their  tasks.  The  provisions  will  therefore  be 

considered  compatible  with 

the  principle  of  personal 

independence,  as 

long  as 

the 

abovementioned requirements in respect of the principle of financial independence are taken into 
account12. 

3. 

Staffing of banking supervisory tasks 

The ECB notes that concerns have been raised by the International Monetary Fund regarding difficulties 
experienced  by  the  CBI’s  banking  supervisory  functions  in  recruiting  and  retaining  experienced  staff13. 

The  CBI  performs  these  functions  in  accordance  with  national  law  and  in  the  context  of  its  role  as  a 

national competent authority within the Single Supervisory Mechanism, within which the ECB carries out 
its  tasks  concerning  the  prudential  supervision  of  credit  institutions14.  As  noted  in  the  Basel  Core 

10  

11  
12  

See Section 33AG(2) and (3) of the Central Bank Act 1942;  Section 6 of Statutory Instrument No 99/2008 - Central 
Bank and Financial Services Authority of Ireland Superannuation Scheme 2008; and Central Bank of Ireland Annual 
Report 2016, p. 116. 
See, for example, the ECB’s Convergence Report 2016, p. 23. 

See also paragraph 3.2.10 of Opinion CON/2010/80. 

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Principles  for  Effective  Banking  Supervision,  the  supervisor  should  have  adequate  resources  for  the 

conduct of effective supervision, including a budget that provides for staff in sufficient numbers and with 

skills  commensurate  with  the  risk  profile  and  systemic  importance  of  the  banks  and  banking  groups 
supervised and salary scales that allow it to attract and retain qualified staff15. 

ECB-PUBLIC 

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

Done at Frankfurt am Main, 24 November 2017. 

[signed] 

The President of the ECB 

Mario DRAGHI 

13  

14  

15  

See  IMF  Country  Report  16/318,  Ireland  Financial  Sector  Assessment  Program  Technical  Note  –  Banking 
Supervision  and  Update  on  the  Assessment  of  Observance  of  the  Basel  Core  Principles  (FSAP  2016), 
September 2016. 

See Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central 
Bank concerning policies relating to the prudential supervision of credit institutions, OJ L 287, 29.10.2013, p. 63. 
See Basel Committee on Banking Supervision, Core Principles for Effective Banking Supervision, Basel, September 
2012, Principle 2 (‘Independence, accountability, resourcing and legal protection for supervisors’), p. 23. 

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