Cabinet signs off on pension boost for people who work beyond the age of 66

At present, the current state pension is paid at €253 a week for people who retire at 66.

The Cabinet has signed off on its major pension reform plan which will see the retirement age staying at 66, but allowing people to continue to work if they choose.

Launching the new scheme, Ms Humphreys made clear that PRSI increases "will be needed in the future" to pay for her pension plan, but insisted they will be modest and phased in gradually.

“Government will bring forward by spring 2003 a roadmap for PRSI increases over the next 10 years. I think it's important to be honest with people that PRSI raises will be needed to pay for a pension system into the future,” she said.

“I'm also very conscious of the challenges that people are facing at the moment. I want to assure people that PRSI increased and carried out on a gradual, incremental basis,” she added.

She said this more modest approach is achievable due to the country's healthier financial position.

She said a 2017 review of the Social Insurance Fund predicted it would be in deficit to the tune of €1bn by 2021, when it will have a surplus of over €2bn by the end of this year.

This is because of a higher than expected number of people in work and people earning higher salaries than expected, she said.

At present, the current state pension is paid at €253 a week for people who retire at 66.

Under the plan, the official State pension age will remain at 66, but those who work until they are 70 will get pensions of up to 24% more upon retirement, with payments rising by approximately 5% for every year worked beyond 66.

At present, the current state pension is paid at €253 a week for people who retire at 66.

Under the new flexible model, those who work on will recieve a higher payment when they eventually do retire. If you work until you are 67, your weekly pension will be €266; it will be €281 if you retire at 68; €297 if you retire at 69 and €315 if you retire at aged 70.

Asked about a report from Irish Fiscal Advisory Council, which predicted that someone earning €50,000 would have to pay an additional €1,200 in PRSI, Ms Humphreys said any increases will be "modest" and introduced gradually.

She told a news conference that the public "gave its verdict" on keeping the pension age at 66 and that must be respected.

The new pension measures, which were approved by Cabinet this morning, are in response to the recommendations from the Commission on Pensions.

She said the Government is seeking to rectify a 70-year problem by giving people choice in when they retire.

She rejected assertions that this plan is simply introducing a higher pension age by stealth. “This is about giving people choice,” she said.

The changes end a long-running debate on how to handle the pension issue, against a background of a rising elderly population. Fine Gael and Fianna Fáil battled over the issue in the February 2020 election and later in government formation talks.

The pension age had been due to rise to 67, something which was politically divisive and seen as a red line issue by many Fianna Fáil TDs. 

However, under Ms Humphreys’ plan, which will kick in from 2024, workers can retire at any time of their choosing between 66 and 70, creating what one senior government source called “flexibility” in the State pensions system, which they said was “moving from a one-size-fits-all” approach to a system that is more in line with other European countries.

The overhaul of the old-age pension will also see Ireland change to a total contributions approach over the next 10 years, meaning pension levels will be based on what is paid in over the lifetime of contributions rather than the current approach, which averages out contributions. This is due to concerns that some people are missing out due to breaks in their working lives.

It would also see long-term carers provided with a full State pension from 2024.

The Coalition parties have agreed to pension proposals put forward by Social Protection Minister Heather Humphreys, and are due to sign off on the changes today, Tuesday. File picture

To pay for the new plan, “slow and gradual” increases to PRSI will be implemented, but sources stressed that these will not happen this year or potentially even next year.

They will instead be based on an actuarial review of the Ireland Strategic Investment Fund (ISIF), the results of which will be released in April next year.

These reviews will be carried out once every five years.

In a report published earlier this year, the Oireachtas committee on social protection proposed that the State pension age should not rise beyond the age of 66. 

However, this was at odds with the report of the Pensions Commission last October, which recommended the retirement age should be set at 66 and three months in 2028, 66 and six months in 2029, and 66 and nine months in 2030, before hitting 67 in 2031.

This summer, Taoiseach Micheál Martin said the pensions plan would see contractual retirement ages banned. He said: 

This idea of having to retire at 66 has to go.

"I think the market will dictate this but, equally, we want to make sure there’s no discrimination against people of that age because people are living longer, they’re healthier, quality of life is improving." 

On Tuesday, the Cabinet will also sign off on Children’s Minister Roderic O’Gorman’s proposed Work-Life Balance Bill, which will include a package of measures to support families and promote women’s participation in the workforce.

The bill will introduce a new right to paid leave for victims of domestic violence of five days per year.

The bill will also introduce new rights for parents and carers, including the right to request flexible working and the right to leave for medical care of a child, as well as extending the statutory right to breastfeeding breaks from six months to two years.