Thursday 22 August 2019

Pensions time-bomb: Risk report warns workers not saving enough - or at all - for retirement

Employment Affairs and Social Protection Minister Regina Doherty. Photo: Steve Humphreys
Employment Affairs and Social Protection Minister Regina Doherty. Photo: Steve Humphreys

Hugh O’Connell

A major Government report has warned of a looming pensions time-bomb as the number of people entitled to the State pension is set to more than double over the next 36 years.

The latest national risk assessment, published today, has identified the country’s ageing population as one of the most significant risks facing the State in the coming years.

And it warned that Ireland’s low level of private pension coverage – just 35pc of private-sector workers have their own pension – shows many workers are not saving enough, or at all, for their retirement.

The social insurance fund is set to run up a deficit of up to €335bn over the next 50 years as more people are entitled to the State pension.

The Government's risk assessment paints a bleak picture of the pension system and the health service in the future.

The number of people aged over 65 is projected to increase from one in eight to one in six by 2030 while the number of people aged above 85 is projected to almost double.

At the same time the number of people in the workforce compared to those in retirement will fall, putting a greater strain on public finances.

Even with the gradual increase in the retirement age to 68 by 2028 there will be more than 1.4 million people eligible to claim a State pension by 2055.

This compares to 586,000 people who were eligible in 2015.

The report warns: "The task of financing increasing pension spending will fall to a diminishing share of the population as projections indicate the ratio of people of working age to every person aged over State pension age will reduce from its current rate of 4.9:1 to 2.3:1 over the next 40 years."

It also finds that Ireland's low level of private pension coverage is a problem and suggests workers are not saving enough, or at all, for their retirement.

This reflects "a significant risk both in terms of the funding and sustainability of pensions in Ireland", says the report.

The document also warns that older age cohorts tend to be the highest users of most health and social services and have more complicated care needs.

This is likely to have a knock-on impact on the health service with some 60pc of over 50s having at least one chronic condition such as heart disease, cancer, diabetes or lung disease.

Such conditions account for four-out-of-10 hospital admissions and three-quarters of hospital bed days.

The report says the economic burden of healthcare expenditure regarding chronic diseases is considerable.

It will not only be for the health system but also in terms of families and society as a result of reduced income, early retirement, an increased reliance on social care and welfare support and diminished productivity and absenteeism.

The national risk assessment also identifies others risks facing Ireland in the coming years including the fallout from Brexit, and its potential economic impact, as well as potential instability in Northern Ireland.

The report warns of the risk that negotiations may break down and cause divisions among member states on issues like the EU budget.

It warns the loss of the UK voice in EU-decision making may "tip the balance of interests towards a more conservative or protectionist stance" and also risks Ireland's influence within the bloc.

The 92-page report also considers other ongoing risks such as international tax changes and the Irish economy's reliance on multinational corporations.

It also looks at the risks of climate change, the supply and affordability of housing and overcoming infrastructure gaps, and ongoing and evolving cyber-security risks.

Irish Independent

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