PRSI hikes needed to keep pension age at 66, Heather Humphreys says

Keeping the State pension age at 66 will be paid for by increases in PRSI contributions in the future, Minister for Social Protection Heather Humphreys has said.

Ms Humphreys said Government had on Tuesday agreed a “substantial and significant” set of policy measures representing a “clear road forward for the future”. She said it was the “most significant ever reform of the State pension system in Ireland”.

Under the reforms, the State pension age will remain at 66 with a new “flexible” model introduced allowing for increasing payments on the basis of working longer. Illustrative examples given by the Department suggest each year will be equivalent to about an extra €15 per week on the State pension age.

Ms Humphreys said the retained pension age will “mean the need for PRSI increases in the future. I think it’s very important that we’re upfront and honest with people about that today.”

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However, much of the detail on how this is to be paid for will not become clear until next spring, when a roadmap for PRSI increases is published. That will be informed by an actuarial review of the Social Insurance Fund which will be completed later this year, she said.

[ Higher State pension proposed for those who work beyond 66 ]

“Based on that review, the Government will bring forward by spring 2023 a roadmap for the next 10 years.”

She said PRSI increases would be “modest and carried out on a gradual, incremental basis”. Reviews of the social insurance fund will be carried out every five years, allowing governments of the day to fine-tune PRSI increases, she said. The issue of PRSI payments on earned income for those over 66 years old would also be examined as part of that process, she said.

Cabinet also agreed to move to a total contributions model for determining the level of pension payments given to retirees – with Ms Humphreys saying today a total of 40 years’ contributions would be needed to access the full State pension payment.

The total contributions approach will be phased in over 10 years starting from 2024.

There will also be an enhanced State pensions provision for long-term carers introduced from January 2024, with time spent caring long-term for a loved one recognised in the pension scheme.

Ms Humphreys said the Department of Enterprise, Trade and Employment is to “introduce measures” that allow but do not compel an employee to stay in employment until the State pension age. The Government has also committed to exploring a scheme that would modify the current benefit payment for 65 year olds to provide a benefit payment for people who have worked for 40 years or more but are not in a position to remain working in their early 60s.

However, Sinn Féin leader Mary Lou McDonald described the proposal as “almost a Trojan horse to raise the pension age in reality to the age of 70″. She said working people of all ages “will be very, very unsettled to hear that in a civilised, prosperous, indeed a wealthy society the age of retirement, the choice of retirement is at the age of 65 not 70. It seems to me the Government are trying to pull a manoeuvre”.