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Plan to increase PRSI to cover Taoiseach’s promise of keeping pension age at 66

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Taoiseach Micheál Martin. Photo: Gareth Chaney

Taoiseach Micheál Martin. Photo: Gareth Chaney

Taoiseach Micheál Martin. Photo: Gareth Chaney

Workers and employers will have to shoulder the financial burden of the Government’s plans to keep the state pension age at 66.

PRSI contributions are set to rise in the coming years to ensure the pension age does not increase.

While the Taoiseach vowed to Fianna Fáil party colleagues the pension age would stay unchanged, the Fine Gael social protection minister said people should be offered flexibility around the age at which they retire, potentially offsetting the need for PRSI increases.

Fine Gael fought the last general election on the basis of increasing the state pension age to 67 this year, but dropped this during talks for the programme for government.

“There are a lot of countries who have a flexible pension age and I think that’s a model we need to look at here in Ireland,” said Social Protection Minister Heather Humphreys.

It is not expected that PRSI increases will be introduced in the next Budget later this year, but they will be gradually raised to allow people to retire at 66 and draw down the State pension.

Senior Government sources suggested different rates of pension payments, linked to when a person stops working, may be introduced.

This could see people who retire at 66 get less money than someone who stops working later in life.

However, others in Government believe this policy should not be pursued as there are significant drawbacks to enacting the proposal.

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“You’re essentially asking people to chart out their own life expectancy, which I don’t think is good policy,” a source said.

There are also discussions around reducing the Universal Social Charge (USC) to offset any PRSI increases, but sources said this is not something that will be looked at in the Budget.

Debate around the pension age was sparked by Taoiseach Micheál Martin telling his parliamentary party he did not believe the age for the state pension should increase beyond 66.

But he said PRSI contributions will need to increase to pay for it. He also told the meeting people should be allowed to work beyond 66 if they wish and continue to pay PRSI so they can qualify for a full pension. After the meeting, Mr Martin said he was not trying to undercut Ms Humphreys, and difficult decisions will have to be made around PRSI.

Ms Humphreys last night said she was confident the three coalition parties could reach an agreement.

“I agree with the Taoiseach that there needs to be flexibility,” she said.

“Depending on your job, some people aren’t physically able to keep working while there are others who are quite happy and want to work a bit longer. So I think we need to strike a balance here and we need to give people options so that they can make decisions which best suit their own circumstances.”

Tánaiste Leo Varadkar previously hit out at suggestions that PRSI contributions for employers should be increased to pay for the pension age remaining at 66. A Fine Gael source said the “hard-pressed workers will once again have to pay for it all”.

The Green Party, which campaigned in the last election to keep the pension age at 66, is understood to be in favour of increasing PRSI to pay for the measure.


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