Bill for State pensions ‘could rise by nearly €200 million per year’

The State’s bill for the old age pension could increase by nearly €200 million annually in the years ahead, a new official paper drawn up for

a national economic dialogue this week has forecast.

The paper, drawn up by the Department of Finance and the Department of Public Expenditure and Reform, says demographic pressures will impact on both the contributory and non-contributory State pensions.

The paper warns that under a “no policy change” scenario expenditure on the two State pension schemes could reach €7.5billion by 2026 –representing an annual increase of €195 million until that year.

“Furthermore, it is estimated that by 2026 expenditure on supplementary benefits (including household benefits, free travel and fuel allowance) could increase to around €800 million. The estimated increase per year due to demographics alone is in the region of €200 million.”

Expenditure

The paper says that in 2013 expenditure on the two pension schemes amounted to €4.93 billion or about a quarter of total spending on social protection schemes and services. It says that between 2003 and 2013 the number of people in receipt of one or other of these State pension schemes increased by 115 per cent from 201,000 to over 420,000.

“In particular, the number of recipients of the contributory State pension has grown significantly from 114,000 in 2003 to 330,000 in 2013.”

Meanwhile a separate official paper drawn up in advance of the talks warns that with a return to economic growth it will be important to maintain and build on progress made in improving the country’s competitiveness.

Focus on costs

“This will involve focusing on costs which are domestically determined such as property, access to electricity, water, waste, communications and business services. Among these costs,

Ireland

seems to be most out of line in issues such as thermal treatment of waste, legal services, electricity supply for small and medium enterprises and cost of credit.”

The paper says Ireland’s competitiveness position improved over the last five years but much of this was due to external factors such as the weak euro and falling energy costs.

It also says the recent improvement came from a very high cost base. In 2013 Ireland was the third most expensive country in the euro zone for goods and services.