Brian Keegan: Q. What is the value of the state pension? A. €400,000

For very many people, their quality of that life will depend on the level of pension they can enjoy after their working careers have finished. 

It might be seen as surprising that a mere 30% of workers make regular provisions for their retirement. That figure is low but perhaps the real surprise is that so many of us provide privately for retirement.

The preferred option for the majority of workers is the safety net of the State’s old-age pension. 

The state pension has always been a creature of the political system and the retirement age for eligibility was a hot topic in last year’s general election campaign. 

The prospect of a state pension some 30 years hence of around €1,000 per month doesn't particularly interest people in the early stages of their working lives. 

However, tell them that a pension entitlement to the value of €400,000 might await them at retirement age and the perspective might change. 

The €400,000, in very broad terms, is what a worker would have to have paid into a private pension fund to achieve the same annuity as is offered by the state on retirement.

The government does not fund pensions in the same way as private contributors, so there is no actual stash of €400,000 in the public coffers awaiting anyone. 

Nevertheless, that is the worth of the state pension entitlement. 

This should focus minds as the debate rolls on regarding the appropriate retirement age for benefiting from contributory state pensions and the impact on the voting public of any dilution of entitlements. 

Deferring the payment of benefits is a dilution of entitlements.

“Contributory” is the essence of the issue. 

Entitlement to the state contributory pension is not just about retirement age — it is about the number of PRSI contributions made over the course of the working career. 

The maximum benefit is tapered if the required number of contributions is not met. 

That tapering calculation is extremely complex, and a topic for another day. 

For now, what is relevant is the legitimate expectation on the part of workers that because they paid in money towards a benefit, even if those payments were mandatory, the benefit should be there.

The retirement age is under challenge because of the affordability of providing state pensions for more retirees who are also tending to live longer. 

As part of the agreement for the current coalition government, a Commission on Pensions was established to determine the best approach to retirement age. 

The commission, which this week closed its public consultation process, is expected to report by the end of June. 

In any event the commission will only make recommendations, not decisions.

However, there is life to be lived after the pandemic. 

For very many people, their quality of that life will depend on the level of pension they can enjoy after their working careers have finished. 

The undertaking between the state and its pensioners is just as important as the undertaking for example between the state and its students. 

What might the reaction be if all children were obliged to leave school at 16 because we couldn’t afford to have too many students in the State system?

There is a long history of policy papers, reviews and party manifestoes to do with pensions. 

They rarely result in change. 

No matter what recommendations the Pensions Commission may make, it is the political decisions, if any, following its report that will be critical. 

On past experience, the issues are quite likely to be dodged again.

• Brian Keegan is director of public policy at Chartered Accountants Ireland