Retirement age: New plan to keep us working beyond 65
Bank wants to raise retirement age to 68 as pension deficit hits €1.5bn
WORKERS in both the public and private sectors face the prospect of having to stay in their jobs well past the age of 65.
The Government plans to increase the pension age in stages, under radical new retirement and pension proposals to be published this week, the Irish Independent has learnt.
The new proposals come as Bank of Ireland (BoI) will tell staff tomorrow it is considering raising the retirement age for its employees to 68.
The Government's National Pensions Framework document will spell out how the increased retirement age will affect long-serving workers compared with new recruits.
Under the new pensions model, workers of different age groups will be given different retirement ages to reflect their proximity to retirement and level of pension contributions.
BoI is looking at forcing its staff to delay their retirement until they reach 68, in a desperate bid to plug a €1.5bn hole in its pension fund.
It is the first major employer to consider forcing its staff to work for longer before they qualify for a full pension, but other large companies are understood to be contemplating similar plans.
Social and Family Affairs Minister Mary Hanafin, who has responsibility for pensions policy, is due to launch a long-awaited pensions policy framework on Wednesday.
The minister warned last October the Government might raise the retirement age.
"Certainly, an increase in retirement age is an option we must consider and we will make any final decision in this regard as part of the package of pension reform to be announced in the long-term framework," she said at the time.
Most occupational pension schemes allow workers to retire at the age of 65, while the state contributory pension is paid from the age of 66. A state transition pension is paid from 65 years of age for those who retire before they reach 66.
Finance Minister Brian Lenihan said in December's budget speech that future public servants would not qualify for a full pension until the age of 66.
A new pension scheme for the next generation of public servants was to be announced this year, he said.
And in recent talks with public sector unions, the Department of Finance indicated the retirement age could be set at 70 for new entrants.
Previously, the An Bord Snip chairman Colm McCarthy urged the Government to examine the retirement age in a bid to deal with escalating pensions costs.
When publishing his multi-billion euro cost-cutting report, the economist claimed the sharp increase in life expectancy was becoming "hugely costly" to the Exchequer and creating "huge problems" for state pension schemes.
While his report did not recommend a new retirement age, the chairman said hiking the age was one of three options available.
"It's all very well saying 'let's all retire at 65' and the State will pay the pensions for a few years afterwards. If people used to snuff it at 70, but have decided to snuff it at 85 and 90, well then something's got to give," he said.
"There either has to be huge increases in taxes to pay for this or huge increases in saving rates in private funded schemes. If people are unhappy with either of those, it seems to be the obvious alternative is an increase in retirement ages."
BoI has a €1.5bn deficit in its defined benefit pension fund. This is more than one-and-a-half times its stock market valuation.
Making its staff work until they are 68 before they qualify for a full pension is one of a number of proposals being looked at to plug the deficit.
Other options include making its staff pay more than the average contribution of 2.5pc of salary, capping pensionable pay as opposed to actual pay, and reducing the rate that pensions benefits are built up, according to banking sources.
Bank staff with 40 years' service retire on two-thirds of their final salary.
Some 18,000 people are members of various BoI defined benefit schemes. This number includes workers still contributing to the scheme, pensioners and deferred members who have left the bank but have yet to retire.
The bank contributes 16pc of bank workers' salary into the defined benefit scheme, but has told its staff it is unable to pay more.
Former head of Bank of Ireland Life Brian Forrester was asked by the bank to outline various options for reducing the deficit. Staff will be told that one of the radical solutions he proposes is raising the retirement age to 68.
A BoI spokeswoman said no decisions had been made yet, but confirmed various options were being considered.
A spokesman for the Irish Bank Officials' Association (IBOA) said the union was concerned about the possible impact for its members.
The IBOA has submitted counter-proposals to the bank to address the deficit situation.
In Britain, the state pension age will rise to 66 in 2024, to 67 in 2034 and 68 in 2044, with each increase being phased in over two years. But recently there have been calls for the retirement age to rise to 70.