A REPORT PUBLISHED today by the Minister for Finance Paschal Donohoe highlights the impact of an aging population on Ireland’s economic growth and current pension model.

The report details how the country’s changing demographics in the decades ahead will lead to a slower rate of economic growth. In turn, the older population will cause an increase in Government spending linked to age. 

All this is likely to put pressure on the Exchequer and in turn on the pension age.

The report, entitled Population Ageing and the Public Finances in Ireland, suggests possible policy reforms including linking the State Pension Age to life expectancy. 

Analysis by the Department shows that maintaining the State pension age at 66, compared with proceeding with previously legislated increases, could result in additional costs of around €50 billion over the long-term.

The current age to qualify for the State Pension is 66 and the average life expectancy in Ireland is 79.6 years for males and 83.4 years for females.

However, the report details how the make-up of Ireland’s population is set to change dramatically in the coming years. Currently, there are approximately four people in the working age population to support each individual over 65 years old. However, this figure is set to fall to just over two by 2050.

These demographic changes are likely to lead to an increased demand for Government spending on areas such as health and pensions. 

The report states that to cover the expenses arising from an aging population structural reforms to the pensions system will have to be made.

By 2050, age-related costs are expected to be €17 billion higher than in 2019, in today’s terms. 

Speaking about the findings in the report, Minister Donohoe said: “Looking at the years ahead, the analysis of the impact of demographic change in Population Ageing and the Public Finances in Ireland, highlights the need for serious policy considerations in this area.

“In November 2020, the Government established the Commission on Pensions to examine the sustainability and eligibility issues with the State Pension and the Social Insurance Fund.”

“As my Department’s report states, delaying policy decisions in this area has the potential to negatively impact the public finances in the years ahead, emphasising the importance of further progressing the Government’s work in this area,” he added.