State workers staying in their job beyond 65 years of age will still have to pay contributions towards a pension, despite receiving the same weekly amount when they retire.
Finance Minister Paschal Donohoe confirmed some public servants will now be given the option to stay on in their job until 70 years of age.
The changes came after concerns about public workers being forced to retire at 65 but having to wait a year until they can collect their pension.
The initiative falls short of full abolition of mandatory retirement. It also will not force any changes in the private sector. Mr Donohoe said changes there could be decided individually by employers.
Under the plans, public service workers recruited before April 2004 will be allowed stay on in work until they are 70. The minimum pension age though will not be affected by the change.
The legislation is being drafted and before it passes an interim agreement will be made in the public sector allowing workers to be re-hired at 65 so they can work until the pension age of 66.
But the overall changes will not affect all public service workers. The extended working years will not apply to some frontline workers, including gardaí, fire services, and Defence Forces.
The minister said that as people were living longer and were in better health, many public servants wanted to work for longer, but could not due to a mandatory retirement age of 65 for those recruited before 2004.
The minister also recognised the changes could result in a higher public service pay bill, as older workers staying in employment longer may be in higher grades and at higher pay levels and would also not be replaced by younger workers on lower rates.
However, his department is insisting the actual cost for the State would be partially offset by the fact that the pension lump sums would be deferred for longer.
A key issue which may concern workers staying on longer is the fact that those public servants must still pay pension contributions that will not be included in their payments when they retire.
Workers who have paid 40 years of contributions entitling them to a full pension but decide to stay on for longer will continue to pay contributions, but will not accrue further pension entitlements.
Changes in the private sector will be addressed through a workplace relations commission code of practice, which will look at changes for those workers. But this will not be compulsory.
Age Action welcomed the changes with its head of advocacy and communications Justin Moran saying the current situation, where retired people are not entitled to the state pension until they turn 66, “creates a great deal of difficulty of financial hardship for a lot of older workers”.
Mr Moran said the current situation forces people on the dole, which is €50 to €60 less than the state pension, where there are “more 65-year-olds on jobseekers’ benefit than at any other age”.
Mr Donohoe said legislation would be needed to implement the changes and he hoped to introduce it early next year.
Former tánaiste, Labour’s Joan Burton also welcomed the move and said: “The experience and expertise of older workers, as well as the fact that, as a nation, we are living longer and leading healthier lifestyles, means that many in the 65-70 age bracket want, and can continue to have an important input in the workforce.”
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