The Government should press ahead with plans to raise the State pension age first to 67 and then to 68, a group of financial advisers has said. The planned increase in January this year was deferred by the Government last October.
Brokers Ireland, the representative body for insurance and financial brokers, is urging the Government to reconsider halting plans to extend the State pension age to 68, in a submission to the Commission on Pensions. Failing to do so would have a “catastrophic impact” on pension provision in the future, the body notes, adding that the pension age should be directly related to life expectancy.
“Over the longer term, increasing life expectancy will continue to outpace the increase in pension age,” its submission says.
The State pension age was due to increase from 66 to 67 as of January 1st this year, and then to 68 in 2028. However, it became an issue in the general election of February 2020, and subsequently the Government announced it would defer the issue for a year, pending a report from a newly-established pensions commission.
The commission is now receiving submissions to its review of the pensions framework, before making recommendations to the Government by the end of June.
The issue of when people should receive their State pension comes back into focus as the sustainability of the State’s pension fund is being questioned.
Ireland currently has one of the lowest shares of its population aged 65 and over – recent figures from Eurostat show a share of 14.4 per cent, compared with a European Union average of 20.6 per cent. However, this share is expected to increase over time.
Increasing the State pension age is one way of cutting costs, as it is estimated that delaying the increase in the State pension age will cost the State €221 million this year and €453 million in a full year. However, it’s not as simple as that, as the Government currently pays a benefit payment to those who have retired but are too young for the State pension, which also carries a cost.
Ibec
In its submission to the commission, business representative group Ibec said a higher State pension age would make the system more sustainable, and that it would like to see the age linked with life expectancy. A poll of business leaders surveyed by Ibec found that 40.2 per cent favoured increasing the State pension age as a possible solution to funding issues.
In its submission, however, Siptu argued that there is no “demographic need” to increase the pension age beyond the current level of 66 in the medium term. Chartered Accountants Ireland, meanwhile, said that if a change to the age was deemed necessary, a minimum of 10 years’ notice would be needed, and the State pension age should not be increased by more than one year at a time.
Also on the issue of age, Ibec wants employers to be allowed to retain the ability to fix mandatory retirement ages in contracts.
“The removal of this ability would be disproportionate and arbitrary,” it said, adding that it expected that rates of PRSI – for both employees and employers – would also have to increase over the coming decades in order to offset the increased costs of an ageing population.
It also wants to see the current approach, whereby a pension applicant can opt either for the new total contributions approach (TCA) or the older averaging approach, depending on which approach offers a higher pension, replaced with just the TCA.
