There used to be a joke that the trouble with retirement is that you never get a day off. But many now ruefully reflecting on rampaging inflation rates and wondering how they might stretch their pensions in sync, may not see the funny side. Understandably, sensitivities around the issue abound.
So Taoiseach Micheál Martin’s remark to party members, stressing our state pension age should not go beyond 66 and that PRSI increases may be needed over time to fund this, will be a source of relief for some – and trepidation for others.
As Finance Minister Paschal Donohoe, frequently reminds us, the only money the State has is what it collects from citizens or borrowing. Thus any change comes with costs.
But fears about the growing hole in the funding pot for State pensions heading into the future are not new.
Only last October, the Pensions Commission recommended that the age at which people become eligible for a pension should increase from the current 66 years to 67 by 2031, and to 68 by 2039.
The economic reality is that as people are living longer, more money is needed from State coffers.
A few decades ago, the average life expectancy in the Republic for a woman was 78, while for a man it was 72.
This will rise to 86 and 83 respectively over the next decade, then to 88 and 86 by 2051 – so extra funding will have to be found.
Yet in February this year, the Oireachtas Joint Committee on Social Protection recommended that the State pension age should not rise beyond the age of 66.
The headache the Government faces is that without changes to the current state system, the Social Insurance Fund – which funds it – will be short €2.3bn in just eight years’ time and will be €13.4bn in the red by 2050.
Those currently in employment – and probably paying their parents’ pensions – may find there is nothing in the coffers to pay theirs in 20 years’ time.
Thus the consensus was that to facilitate stable, affordable pensions, people would need to work longer.
Moves such as changing the PRSI rates and making alterations to contributions to the state purse have to be considered very carefully.
As things stand, once people reach the age of 66 they no longer have to make PRSI contributions on private or
public sector pensions, or other income. But this too may have to change.
It all depends on the number of people in the workforce – so it is important those who wish to work beyond the standard retirement age be allowed to do so.
One way or another, people are entitled to certainty and clarity on the issue.