Work until you’re 69 to qualify for State pension – watchdog

It says the population is young by European standards at the moment but is ageing rapidly.

Rising healthcare costs also mean measures are needed to deal with the increasing cost of an older population.

The call is controversial because previous plans to increase the State pension age proved highly contentious during last February's general election.

The three Government parties have agreed to defer the increase in the State pension age to 67 for at least a year.

But the acting chairperson of the Fiscal Council, Sebastian Barnes, warned of a rapidly ageing population and rising healthcare costs in a new 'Long-Term Sustainability Report'.

At the launch of the report, he suggested the pension age could rise to 69 in the next 15 years.

The ageing of Ireland's population has major implications for public spending on pensions, health and long-term care, the report states.

Ireland's share of older people is relatively low today by European standards.

But the dependency ratio is set to reach the current EU average by the middle of the next decade. This is the ratio of those aged 65 and up, to those aged 15 to 64.

Life expectancy at 65 is expected to rise from 85 to 89 by 2050. This would leave the public finances on a vulnerable and unsustainable path, Mr Barnes said.

He said that under current policies, government spending would outstrip revenues from 2025 as pensions and health costs increase.

"Policy action will be required in the coming years to manage the impact of an ageing population on pension costs and more widely to manage pensions and health pressures."

Prompt and early action in the coming decade will help to reduce the overall adjustment needs, the report states.

"As life expectancy increases, implementing already legislated increases in the pension age to beyond 66 will go a long way to achieving this."

He said a combination of strengthening the public finances earlier and making reforms sooner would reduce the scale of the adjustment needed.

"Adjusting the pension age in line with rising life expectancy would make the system more sustainable," the Fiscal Council maintains.

In the next 30 years, the percentage of the population over the age of 65 will rise from 14pc at the moment to 27pc, almost doubling.

Around half of the debt burden in 2050 will reflect unfunded ageing costs, the Fiscal Council calculates.

What the council calls "ageing pressures" will mean the cost of maintaining existing service levels will exceed the ability of the State to meet new spending requirements and keep within EU rules.

Under current legislation, eligibility for the State pension is due to increase from age 66 to 67 with effect from January 1 next, and then to age 68 in 2028. The proposed increase in the pension age was a massive issue during the general election campaign.

Fianna Fáil had committed to retaining it at 66, but Fine Gael had expressed reservations about this.

In the end, it was agreed that the increase be deferred, pending a report from the Commission on Pensions, which will examine the sustainability of and eligibility for the State pension.

Irish Congress of Trade Unions social policy officer Laura Bambrick said we needed to equally focus on the lack of money going in to the State's coffers to pay for pensions, and not just the money going out.

And Dr Bambrick said there was a need to introduce a flexible qualifying age for the State pension to take account of different ages when entering full-time employment between manual and college-education professionals, and differences in life expectancy between social classes.

She said work conducted by the Low Pay Commission last year estimated that employers' PRSI contributions, at 3.7pc of modified gross national income, put Ireland in 25th place out of the EU-28 for employers' social insurance contributions.

Life expectancy is not uniform across all social classes. She said the national deprivation index in November last year showed the difference in life expectancy between the most deprived area (Limerick City) and the least deprived area (Dun Laoghaire/Rathdown) was 6.4 years for women and 7.5 years for men.

Ictu recommends a flexible qualifying age for the State pension.