On Tuesday, the Irish Government announced a major reform to the pensions system, ending a long-running political debate on how to handle this issue as the retirement age had been due to increase to 67. The reforms, which will retain the retirement age at 66, also provide the possibility for people to continue to work up to 70 years of age in return for a pension of up to 24% more upon retirement.
Under the plan, which is due to kickstart in January 2024, this would be done incrementally, with payments rising by about 5% for every year in employment beyond 66. At present, the current state pension is paid at €253 per week, while those who retire at 70 years of age will receive €315 a week.
For the first time, long-term carers are also set to be provided with a pension – while the Government has also committed to exploring a new scheme which will aim to support people who cannot continue working into their early 60’s.
Speaking on the launch of the new scheme, Minister for Social Protection Heather Humphreys said, “The measures agreed by Cabinet today represent the biggest ever structural reform of the Irish State Pension System. We know that people are living longer and healthier lives which is hugely positive. At the same time, everybody’s job and circumstances are different so we need to move away from a ‘one size fits all’ approach to the pension age. That is why from 2024, Ireland will move to a new ‘flexible pension age’ model, similar to the systems in place in a number of other EU countries.”
Analysing the consequences of this announcement, the Irish Fiscal Advisory Council (IFAC) – an independent statutory body which assesses official budgetary forecasts and fiscal policy objectives, has said it is likely PRSI rates will need to be raised in order to keep the pension age at 66.
Sebastian Barnes, Chair of IFAC, commented that the decision not to raise the pension age would mean that higher taxes will now be needed to ensure the sustainability of the system.
Minister Humphreys has agreed that an increase in PRSI is likely to occur – although she said that this would be done “in a more gradual way.” The Government is expected to publish a roadmap detailing the extent of PRSI increases in the Spring of next year.