A NEW “FLEXIBLE” pension system that will give people the option to work until they are aged 70 in return for higher payments will come into effect on 1 January. 

The change, announced by Social Protection Minister Heather Humphreys in 2022, will see the State pension age remain at 66 years old. 

However, under the new system, people will be able to defer claiming the State pension and work longer in return for a higher pension of about 5% each year after 66. 

From January, the basic weekly rate for the contributory State pension, for someone who has made their full PRSI contributions, will be €277.30. 

The new system means that a person who continues working until the age of 67 would receive an additional €13 each week, bringing their pension to €290.30 a week.

Similarly, 68-year-olds will receive €304.80 a week, 69-year-olds will receive €320.30, and those aged 70 and over will receive €337.20.

This “flexible” approach will allow those who want to work on to carry on in employment, but will also allow people who have not built up enough contributions to receive a full pension to carry on working in order to reach it.

The Department of Social Protection said that a person with less than 40 years contributions can use the period between 66 and 70 years of age to build up additional entitlements.

If a person has less than 10 years PRSI reckonable paid contributions, they may be able to use this period to establish entitlement to a contributory State pension, the Department said.

The measure is being introduced for those who turn 66 from January 2024. Therefore, the first people to be eligible for a higher rate will be those who turn 67 in January 2025.

Commenting on the new system, Minister Humphreys said the main aim of the change is to provide people with more choice.

“It may seem like the obvious choice to start receiving your pension payment as soon as you’re eligible, but this won’t be right for everyone,” she said.

“For example, being able to work longer and continuing to pay PRSI gives people the chance to build up contributions and potentially increase their State Pension payment rate. Or you may have entered the workforce later in life and may not have the required contributions to qualify for a pension at 66.

“These new options will allow you an additional four years to build up social insurance contributions to meet the qualifying criteria, which you wouldn’t previously have had the option to do. And, deferring your pension date to fall between 67 and 70 may result in an enhanced rate of payment if that’s what you want to do.”