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LAST UPDATE | 20 Sep 2022
CABINET HAS GIVEN approval to a new “flexible” pension system that will see the pension age remain at 66, but will give people the option to work until they’re 70 in return for higher payments.
The new system, announced by Social Protection Minister Heather Humphreys this afternoon, will see people who want to work longer be able to do so, and as a result will get a higher pension of about 5% each year after 66.
But Humphreys said that in order to retain the state pension at 66, PRSI increases “will be needed in the future”.
The approved changes will come into effect from January 2024.
The current basic weekly rate for the contributory state pension, for someone who has made their full PRSI contributions, is €253.30.
This means that a person who continues working until the age of 67 would receive an additional €13 each week, bringing their pension to €266 a week.
It will see 68-year-olds given €281 a week, 69-year-olds given €297, and those aged 70 and over given €315.
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.
Speaking to reporters following today’s Cabinet meeting, Minister Humphreys said:
“For the first time ever, we’re going to give people a choice. Every job is different, and every worker is different. So we need to move away from the outdated ‘one age fits all’ approach to pensions. People now have the option to draw down their pension at any point between 66 and 70 and receive a higher pension payment for each additional year.”
“This new system will put the power in people’s hands and give them the choice in terms of what best suits their own circumstances,” she said.
A ‘total contributions’ approach will also be adopted and PRSI contributions by employers will have to increase gradually in order to pay for what has been described by the Government as “the biggest ever structural reform”of the Irish pensions system.
40 years of contributions will be needed to access the full state pension payment, but the minister said this is why her Department are bringing in this flexible approach. “If you reach age 66 and you don’t have the full contributions, that allows you to work until age 70 and add on to your contributions,” she said.
PRSI increase roadmap
“The total contribution approach means everybody will be treated the same and you’ll get your pension based on the total number of years you’ve worked and paid contributions. This measure will save €43 billion between now and 2017.”
The rate of PRSI will not be increased in this upcoming budget give the cost-of-living crisis and the pressures that businesses are already under with high energy bills.
“The social insurance system is in a healthy position. We are expecting a surplus in the form of close to €3 billion by the end of this year, so there is no immediate need to increase PRSI,” Humphreys said.
An actuarial review of the Social Insurance Fund will be completed later this year to “give us the most up-to-date projections” on the fund’s status, the minister added.
Based on the review, the Government will bring forward a roadmap on PRSI increase over the next ten years in spring 2023.
“While I think it’s important to be honest with people that PRSI rate increases will be named here for a pension system into the future, I’m also very conscious of the challenges that people are facing at the moment,” Humphreys said.
I want to assure people that PRSI increases will be modest and carried out on a gradual incremental basis.
Independent actuarial reviews of the Social Insurance Fund will be carried out every five years, with the Government able to adjust PRSI rates based on the most up-to-date information.
“We’re in a different time now where a fixed pension age belongs to another era. We’re living in different times, so I think it’s fair that people can take up the option and again, we’re not telling them they should do it. It’s their choice,” Humphreys added.
Long-term carers
In addition to the move to increase PRSI contributions and keeping the pension age at 66, Cabinet has also approved that long-term carers who have cared for their children for 20 years or more will get a State pension from 2024.
It has long been considered that these parents, while not working outside the home, are providing a valuable service to the State, and should be recognised for it.
“One of my key objectives on taking up the brief of social protection minister was to find a way to recognise the invaluable work of people, mainly women, who gave up their jobs to care for a loved one,” Humphreys said.
“Right now, the state pension system recognises periods of caring up to 20 years, but also requires a person to have at least 10 years normal or paid contributions to benefit from this recognition.
“In my view, that is not enough because a person who cares for a loved one over a longer than 20-year period might not be able to access the state pension system at all, and even if they do, the value of the pension might be reduced because their time spent caring is not fully recognised.
That’s wrong and it has to change, and that’s why Government has today agreed that we will now attribute full social insurance contributions to long-term carers so that they can access the state pension.
The minister has also brought forward a new payment for people who cannot work in their 60s, due the physical nature of their work over their lifetime, such as in construction.
This special payment will be higher than Jobseekers, it is understood.
Cabinet has also agreed that employees who have already signed up to a pension, by law, must receive an annual statement on their PRSI contributions that enables them to understand their entitlements.
The pension age became a major, and rather unexpected, political issue in the last general election after Fianna Fáil promised to postpone the rise to 67.
Fine Gael insisted on it going ahead, while Sinn Féin pledged to restore the pension age to 65.
“When it comes to the pension system, the challenge facing us as a government is that we’re trying to solve a 50 or 60 or 70-year problem. We’re trying to solve the problem today in spite of having just come through a global pandemic, Brexit and now we have a war in Europe and the worst cost-of-living crisis for decades,” Humphreys said.
“And I’m very conscious also that the public gave their verdict in the last election on increasing the pension rating, and we must respect that. So that’s the context the proposal which government has approved today.”
The Pension Commission report published last October said that the State pension age should rise by three months each year from 2028 until it hits 67 in 2031.
The report also recommended that it should then gradually increase to 68 by 2039.
However, the Oireachtas Social Protection Committee recommended that the State pension should be retained at its current age of 66 and that changes to employers’ PRSI contribution rates should be examined by the Commission on Welfare and Taxation to determine the fairest way to increase the rates.
Work Life Balance Bill
Separately, Children’s Minister Roderic O’Gorman will bring the Work Life Balance Bill to Cabinet today which seeks to introduce a new right to paid leave for victims of domestic violence of five days per year.
The Government will also develop supports for employers in implementing it and better support employees, it’s understood.
The Bill will also introduce new rights for parents and carers, including the right to request flexible working and right to leave from work for medical care of a child. The statutory right to breastfeeding breaks will also be increased from 6 months to 2 years.
The minister aims to have it passed by Christmas, with the new leave entitlements to be introduced on a phased basis.
With reporting by Jamie Mc Carron and Jane Moore
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66 is more than suitable to retire. To those that have given their whole life working, and sacrificed time with their own children, it gives them an opportunity to spend as much time with grandchildren, or to relax in their later years.
@The Bolt: Yeah thats great to say n all. I’d love to retire as early as possible. The main issue is affordability for the state with people living longer. PRSI contributions for the average worker over a working life in todays money only covers about 5 years of drawing the state pension. People are living into their 80s/90s. Thats 20-30 years on the state pension. In todays money someone on 40k pays just 64k PRSI for 40 years, they live to say 90 and get 315k pension for those years (numbers obvs not exact with inflation but to give the idea of what goes in vs what goes out). That is the problem and that is unsustainable….. State pension pot isnt called a ticking time bomb for nonreason.
@Paul Hedderman: Those figures you gave there are absolute tripe are you forgetting that your employer contributes double what you give towards your OAP. Person on 40G a year pays roughly 2G a year in prsi and most people work more than 40 years. I will have worked 47 years by the time I reach 65 that would be 94G plus 188G employers contribution 282G in total with no interest included. State pension at present amounts to about 13G per year average age for a man despite all the rubbish about people getting older is still around 81 so that’s 15 years at 13G that’s 165G and your trying to convince people that they don’t fund their own state pension absolute load of codswallop. Our problem is there is too many people pulling from the state pot that don’t contribute or get pensions that they could never possibly contribute to but that wouldn’t fit the narrative
@Michael McGrath: 4% of 40k is 1,600. Many are on far less and contribute far less early on in their careers. Yeah i forgot about the employer contribution thanks for correcting but even with that its still a problem. Way more going out than going in
@Michael McGrath: And remember those who never worked and collected dole all their lives,– and there are very many,– , they automatically get their pensions at 65 or 66 , and someone who might have worked for 25 years and missed out some years,– maybe they were abroad,– , get cut . That is not a fair system.
@Paul Hedderman: No Paul anyone on over 30 grand a year plus employer contributions more than cover their own pension. Our problems lie in lottery style Upper civil service pensions that could not possibly fund the pot they get and of course people that never worked a day in their lives automatically get non contrib pension. Of course the white elephant in the room is that they raided the state pension pot(money that legally was not theirs to touch in reality) to bail out the banks in 2011 or 12 to the tune of 80bn which Mícheál Martin stated never happened and Leo says will never be paid back (by banks that are now making billions every year) and now we have this old chestnut being bandied around that we can’t afford the old age pension.
@The Bolt: Their whole life working?? Leave school at 18. Go to college. Out into the workforce at 23 ish. Retire at 60-66. Life expectancy is 82. Only 43 out of 82 years is working. Yet we expect 43 years to fund 82?? Actuaries can do the maths, but I think this is unsustainable.
@Michael McGrath: I’ll just take the lump thanks. :-)
@Eugene Comaskey: Sure why doesn’t she do something about the Bonkers 5 level pension system People who contribute for 30 years get less pension than a lifetimer on the dole.
Scandalous
@sean o’dhubhghaill: 43 to fund 16 when retiring at 66 for someone living to 82
@Paul Hedderman: you’re also forgetting USC and Income Tax. Pensions come from central funds, which is the entire tax take.
Pension age should be 60
@Aidy McBride: Would you be happy with a 60% income tax rate to fund it?
@Mickety Dee: a 60% band on earnings over 150k? Absolutely.
@Colin Nolan: I’m afraid that would be nowhere near enough to cover the deficit. You’d have to hit the middle earners hard to cover a retirement at 60
@Colin Nolan: do you can’t earn that much. So anyone who can should be taxed to hell for it. Cop on
@Mickety Dee: If a proper state superannuation system was brought in where you, the state (via reliefs etc) and your employer contribute similar to Australia yes it could be managed and the idea has been bandied about for years but it won’t happen because you get out what you put in and top brass in the civil service have killed it at source because they would lose out massively and so would private pension fund managers
@Michael McGrath: Yes, that’s a realistic option. The result is similar though with people having less income to spend
@Aidy McBride: Why 60 ?
For a measly few euros a week more. No thanks. I’m outa here at 66. Had enough of this malarkey.
@Tony O Neill: but if you don’t qualify for full pension at 66 I’m sure you’d be glad to have the opportunity to work on an extra year or two?
@Tony O Neill: im not near pension age but i was thinking the same thing myself. Not much of an incentive is it?
@Rmaybe: that’s fine if your sitting on an office chair all your life, if your laying blocks, pulling cables or up on a roof it’s not so fine to work til 70
@Rmaybe: no. I want to stop being wage slave .don’t want to work until I drop dead.
@Rmaybe: For someone who has never worked in their life their pension is approximately only 20 euro less a week. It’s absolutely scandalous.
Absolute basket case economics, kicking a dented can down the road.
@Greedylocks: I am ok with this as long as it’s the younger people who pay for it. Simply not fair to expect the older people to contribute to their own pensions. Also, employers should pay more prsi.
A Hugh drawback to all of that is the fact that less young people will be able to get jobs as these old fobies over 66 hang on in there to get higher pensions . They will just be hanging on in there doing less work and depriving young energetic well educated people from getting the jobs. The same will happen in Public Service with old fobies hanging in there .
When the pension was introduced it was for 70 year olds in a time when life expectancy was 52. Affordable. Now you can retire at 66 and expect to live to 82. We need to get out of this government pyramid scheme that relies on an increasing birth rate and find alternatives.
@Wiill S Rimer: Talking out of your rear end. The vast majority of working people more than fund the OAP over the course of their working lives in fact anyone above around 35G a year over funds it. Who don’t of course are the non workers and by that I mean people that never worked and those at the top of the state ladder
Abolish USC. This solves the fuel and energy crisis in one go.
Paschal campaigned on abolishing this temporary tax in 2016, so did Leo.
It needs to go.
@Philip Cooper: Would love to see it happen but don’t see it happening,worth too much to the state,if it was abolished they would just bring it back everytime the country got into trouble.
@Philip Cooper: it brings in €4.4b a year, so in the real world spending has to be cut by that amount or taxes raised in other areas to bring in that amount. Where do you want to cut spending?
@Stephen Kearon: 3 billion on Ukrainian refugees is it for this year?? Mostly to hotels. That might be a good start
Many millions have been squandered on virtue signalling projects, and Billions on NGOs every year. Just scrap those budgets and pay pensioners fairly. Simple.
@Owen: where’s the virtue signal here or do you just want to say “virtue signalling” again and again?
I think nothing should change, sure young people have it too handy anyway and as long as im alright that’s all that matters. Anyway when I was young I had it harder than young people today so they should have to pay more so I can be looked after. If they stopped spending all their money on renting luxurious apartments and extravagant cars for getting to work and stuff that money could be used to pay off the national debt that our generation borrowed to protect future generations by ensuring fg and FF were able to get as many hugely talented tds to run the country, young people today should be glad to foot the bill for their elders and their sacrifices.
It’s a good idea. Some people want to retire at 66 and they can but equally there will be some who want to work later if they’re physically fit
To think we had the funds to cater for all pensions into the future – The National Pension Reserve Fund – and the government of the day decided to raid this fund to bail out Anglo Irish Bank and pay unguaranteed bond holders. We are electing politicians who are totally unqualified for the positions they hold and are making decisions which are detrimental to the Irish people.
That number will change “AGAIN”
What about people that have physical jobs, lifting standing carrying, that due to their health have to retire at 66 are they to be punished?
Nationalise all pensions.
@: good way to kick off a civil war.
While there are some genuine cases it’s absolutely ridiculous that someone who has never worked,Never paid any tax in their lifes,pension is only 20 euro a week less than someone who has worked and paid tax for around 40 years..surely if someone hasn’t succeeded in gaining employment by the time they reach 66 why should they receive any form of old age pension…? Why isn’t this a bigger issue…???
If a person retires at 66 and is entitled to the full State Pension there is nothing to stop them taking up a less demanding part time job to supplement their income. Depending on on many extra years worked could it be possible that the extra contributions could be calculated to achieve a higher State Pension when eventually one retires for good.
@Aine O Connor: the issue is deeper than that and is unclear. Can people still working after the age of 66 opt for the lower pension rate and have it paid from 66 onwards?
@Aine O Connor: I was talking to a fella the other day and he was telling me he retired..I was think you spent the last 40 years sipping pints and this yokes pension will be 20 euro less than someone who actually worked for 40 years.
This is the most ridiculous thing yet. So those who chose to retire and leave jobs to the younger school leavers get less. They live on a basic pension. The youth will leave the country with trying to finance this mad idea and their own pension way out of sight. I would have thought it should be the other way around. Public servants cannot draw down their pension until they retire and rightly so. A higher pension and working will drain the finances. Health and education will not get a look in.
So if ya work on till you’re 70 you would get 320 per week pension, give or take a few cents and or any budget increases.
There are up sides and downsides to the idea of sliding retirement ages. I find the notion that someone who has climbed the corporate ladder and finds themselves doing less and being paid a lot more will hold their position which halts the progression of the younger workers. Passing valuable knowledge on was always a challenge in business and having the light of promotion move closer for the upcoming leaders is an area that would face serious risk with this idea.
We need to encourage couples to have more babies instead of making contraception and abortion more easily available. These extra babies would in the future be paying taxes so there wouldn’t be a time bomb
@Tom Mullally: are you crazy? The climate crisis is driven by overpopulation!
@Mary Fitzsimons: it depends on the carbon footprint of each person. If we get well insulated houses and eliminate the use of fossil fuels etc. and reduce our emissions per person to those in 3rd world countries then an increase in the population won’t have much impact
Good development and a welcome one. However, mandatory retirement at 65 MUST now be abolished as there are still plenty of employers that force workers to retire at 65 even when they do not want or need to. Unless we abolish mandatory retirement and call it out for what it is – age discrimination – these new measures will just lead to a “cart before the horse scenario.
If I want to work after 65 and get an extra year till 66 and decide I can go for another year and my employer says nope your finished can I appeal the decision or will all employment contracts have a new clause or retirement date added into them
Can one work parttime after reaching pension age and receiving pension?
Do we really have to suspend our intelligence? Billions spent on refugees, how come the budget for NGOs doesn’t have to balance?
have your say