Thursday 21 February 2019

Could State pension age increase again?

Your questions answered

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Jerry Moriarty, CEO of the Irish Association of Pension Funds (

Q: I have just turned 53 and am concerned about the recent moves by the Government to increase the State pension age. As the State pension age is to increase to 68 from 2028, I'm one of those who will have to wait until the age of 68 to get the State pension - and perhaps longer if the State pension age is increased further after the year 2028. Has the Government given any indications that the State pension age could increase any further? Joanna, Castleknock, Dublin 15

In the Government's 'Roadmap on Pension Reform', which summarises the Government's latest thinking on pensions, it has stated that one of its aims is that there will be no further increase in the State pension age prior to 2035 - other than those already provided for in 2021 and 2028. It has also pledged to ensure that any change to the State pension age after 2035 will be directly linked to increases in life expectancy.

The Government has also stated that it plans to give at least 13 years notice of any planned changes to the State pension age - before implementation begins. It will do the first review of State pension age in line with life expectancy in 2022 - which would allow for an increase in 2035.

Should the Government stick to the goals it has set out in its roadmap, if it does increase the State pension age beyond the age set for 2028, it will be 2035 at the earliest when it does so - and as you will have reached the State pension age before the year 2035, you have no further increases to be concerned about - bar those which will apply in 2021 and 2028.

Should I wait to start PRSA?

Q: The Government's auto-enrolment pension scheme is expected to begin in another four years. My boss doesn't offer a company pension but I had been considering opening a Personal Retirement Savings Account (PRSA). Should I hold off opening a PRSA until auto-enrolment?

Chris, Kilkenny city

You shouldn't hold off. The most important thing you can do in saving for retirement is to start early.

While the intention is to start auto-enrolment in 2023, there is no guarantee it will happen then or at all.

The money you save now can be generating returns for you by the time auto-enrolment starts. Then you can decide whether it continues to make sense to stick with the PRSA or to join an auto-enrolment scheme.

It is also possible that any tax relief you get on your savings now will be better than you can get when auto-enrolment is introduced.

Seasonal worker options

Q: I work for a hotel which closes for the winter and much of the spring. So I make most of my money in summer and early autumn. The hotel doesn't offer a company pension scheme to staff. Would I be eligible to join the Government's auto-enrolment pension scheme when it comes on board? Would auto-enrolment suit someone like myself who could only save into a pension over the summer and autumn?

Tom, Co Donegal

The Government hasn't yet published the full details of who will need to be included in a pension scheme when their employer doesn't have one.

It has however indicated that it will be people over the age of 23 who earn more than €20,000 per year. Anyone earning less than that may opt to join.

It would suit someone like you and it makes sense to save when you can most afford to. The Government is due to publish more details on how the auto-enrolment scheme will work before the end of June.

PRSA and auto-enrolment

Q: I've already got a PRSA. If the Government's auto-enrolment scheme comes in, will I be able to continue saving into that PRSA - and even if I can continue saving into my PRSA, would it work out better for me financially to simply close the PRSA and move into the auto-enrolment scheme?

Gemma, Ashford, Co Wicklow

You should be able to continue saving into your PRSA. However, it might work out better to move into the auto-enrolment scheme, particularly if your employer will have to pay into that as well. The charges are also likely to be cheaper in the auto-enrolment scheme. It isn't clear yet if you will be able to transfer your PRSA in. The Government is due to publish more details on how the auto-enrolment scheme will work before the end of June.

Saving into new scheme

Q: If the Government introduces an auto-enrolment scheme, how much of my income am I likely to have to save into it -and could I opt out of it at any stage?

Tadhg, Dingle, Co Kerry

The Government has indicated that with auto-enrolment, ultimately, where employees pay 6pc of their salary, employers would also have to pay 6pc and the Government would pay 2pc.

This Government contribution would be instead of the tax-relief people currently get. It is likely that it would take a number of years to get to that level of contributions and so contributions will start lower and be phased in over time. It is also not clear yet if the contributions would be based on your total salary or if there would be lower and upper salary limits that you wouldn't pay on. The Government has said that people will be able to opt out - probably after nine months.

Auto-enrolment abroad

Q: How does auto-enrolment work in other countries and which model might the Government follow when introducing it in Ireland?

John, Athlone, Co Westmeath

Britain is the first place to look at, being our closest neighbour. It introduced auto enrolment four years ago. Anybody who wasn't already in a pension scheme and earned over£10,000 and was over the age of 22 had to be put in a pension scheme by their employer.

As a result, there are nine million people saving for a pension now that weren't four years ago. Opt-out rates have been much lower in Britain than expected with only one in 10 people opting out - and those are mostly older people close to retirement. However the contributions being paid into the British auto-enrolment scheme are low - although these are due to increase in April this year and again in April next year. There has been a lot of criticism that the rules are too complex.

New Zealand is the other system that the Government will probably look at closely as New Zealand had a similar population to us. In its system, anyone aged over 18 starting a new job has to be auto-enrolled in Kiwisaver. It hasn't been as successful as in Britain, as more people opt out of the New Zealand scheme.

The Government will have to decide what works for Ireland. The big issues are around who should be included, how much should be paid in, who pays what and who runs the scheme. Some countries allow funds to be withdrawn for hardship or something like a first home purchase.

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