Workers may have to foot €5 billion bill over ageing population profile

IRELAND’S working population could be facing a tax bill of €5 billion a year to 2050 to cope with our ageing population. The alternative is to allow people to work beyond 65.

Alternatively taxes will have to rise or spending will have to be curtailed as the ratio of people at work to those of pensionable age changes radically up to the year 2050.

The problem is our population is ageing faster than previously thought. That has serious financial implications for the State in terms of higher taxes.

Better healthcare means people are living longer than earlier projections which has a knock on effect for public finances, a major conference was told yesterday.

Two economists with the ESRI, Alan Barrett and Adele Bergin told delegates the implications for the State were two-fold.

More money would have to be spent on care for the aged while funding of pensions would place added tax pressures on those at work.

Best estimates now suggest the 11% of the population now over 65 will rise to 15% by 2020 and to 29% by 2050. Because the State spends more on older people through pensions and health-care, the ageing process will require the State to spend substantial sums in the years ahead, the economists warned.

An older population also means less people at work who may consequently face a heavier tax burden, said the authors.

Mr Barrett and Ms Bergin addressed the ESRI conference called Budget Perspectives 2006 Conference.

Their paper dealt found:

* Spending on old-age social welfare pensions (contributory and non-contributory) could rise from the current level of 3.1% of GNP to 4.2% in 2020 and to 9.3% in 2050.

* Spending on health could rise from 7.7% of GNP to 11% in 2050.

While reduced pressures for spending could arise in areas like education and child-benefit the authors warn that any savings will be outweighed by spending increases which the Exchequer will have to fund.

In the light of the changing demographics the authors stressed the need for maintaining payments into the national Pensions Reserve Fund currently worth over €11 billion.