A proposal to link pensions to life expectancy would bring Ireland’s State pension age to 72 in the coming decades.
A new Department of Finance report has found pension costs will rise significantly as the population ages.
It finds that there are currently around four people of working age to support each person aged 65 and over; however, that number is expected to fall to just over two workers per retiree by 2050, as people live longer and birth rates drop.
The report warns the change could result in spending on pensions skyrocketing – rising by €17 billion per year by 2050. It notes that the situation, which will happen if no major change occurs, is unsustainable.
Life expectancy
As a way of addressing the issue, the report suggests raising the State pension age in line with life expectancy.
People currently qualify for the state pension at 66. This was set to rise to 67 this year and then 68 in 2028, although the changes have been delayed.
The department report assumes the changes will take effect, with the pension age reaching 68 by 2028.
It suggests that after 2028, for every year of increased life expectancy, the pension age should rise by three-quarters of a year.
For example, if population life expectancy rose from 80 to 84 - an increase of four years - the State pension age would rise by three years.
Pension
The Department of Finance report predicts life expectancy in 2029, when the pension age is assumed to be 68, will be 82 for men and 85.7 for women.
By 2070, it is assumed life expectancy will rise to 86.8 for men and 90.4 for women – a rise of just under five years for both.
The Department said this would lead the state pension age to rise to 72.
It said in a statement: “We have added these increases to the SPA (state pension age) of 68 years in 2028, and rounded up to the closest whole year, so that SPA by 2070 is 72 years of age.
Population
The CEO of the Irish Association of Pension Funds Jerry Moriarty told Newstalk that any changes must be fair.
“There is a logic to it,” he said. “If people are living longer, then the state pension gets paid for longer, (and) there is a cost to that.
“One of the problems though is life expectancy, when you’re talking about averages, impacts different people in different ways.
“There needs to be flexibility about people who might have been working from a very young age or are in certain jobs where you can’t work longer. Using the average for the whole population would be very unfair on some people.”
Age
Mr Moriarty said a better system could involve linking state pension payments to how long people have worked for.
“Somebody starts work at 18 in a manual job, that’s very different from someone who starts at 25 in an office job. In terms of their ability to keep working, you’re going to have big differences there.”
The Department of Finance study comes a week after a report from the government-established Pensions Commission recommended delaying any rise in the state pension age.
The commission called for the increase in pension age to 68 to be pushed back from 2028 to 2039.
