Workers will have to pay more a year in PRSI to continue working beyond age of 66

Colum Walsh, principal officer at the Department of Social Protection, Ciarán Lawler, Assistant secretary at the Department of Social Protection, and Minister for Social Protection, Heather Humphreys are pictured as Humphries launches  reforms to the State Pension system. Picture: Maxwells 

Workers will have to pay between €1,200 and €2,000 more a year in PRSI to allow them continuing working beyond the age of 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.

“I'm also very conscious of the challenges that people are facing at the moment. I want to assure people that PRSI increases are 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.

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.

Option to choose 

Under the new flexible model, those who work on will receive 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 on Tuesday, 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.