Protect pension age at 66, recommends Oireachtas committee

The Oireachtas committee argues that forced retirement can have negative impacts on some people — but that those who wish to work beyond the retirement age ought to be able to do so. Stock picture

The State pension must be protected and no further increases to the qualifying age should take place, a joint Oireachtas committee report has recommended.

The report, due to be published today goes against a key recommendation of the Pensions Commission which argued that the pension age should be increased.

Over the next 30 years, the proportion of people over the age of 65 is set to more than double from 22% of the adult population to 47%, meaning the pensions bill will put a massive strain on public finances.

Among the 13 recommendations made by the joint committee on social protection, community and rural development is that legislation be developed to ban the use of mandatory retirement clauses in employment contracts.

Negative effects of forced retirement

The joint committee, chaired by Independent TD Denis Naughten, argues that forced retirement can have negative health impacts for those affected by it. However, the report states that changes to the law should enable someone to keep working past the qualifying age for the State pension if they wish to, without compelling them to do so.

Committee members agreed that the pension age should remain at 66 and be funded by an increase in PRSI for employers and the self-employed, as well as an exchequer contribution. But the committee opposes any increases in employee PRSI as set out in one option proposed by the Pensions Commission.

Gradual increases to qualifying age

The commission recommends gradual increases in the qualifying age, which would see it reach 67 in 2031. It found that these changes would save approximately €3.8bn in 2050. But the committee, which was asked to look at the issue by Social Protection Minister Heather Humphreys, has said it "remains unconvinced that the gradual increase in the pension age will have a meaningful impact on the fiscal position of the Social Insurance Fund".

The committee does agree with the commission that PRSI rates for the self-employed are currently too low. It recommends that changes be implemented "gradually" and should be communicated in advance to ensure that individuals who are self-employed can sufficiently prepare for them.

It had been recommended that the PRSI rate for those who are self-employed be increased to 10% by 2030, and that further increases would take place by 2040 and 2050.  

"The committee acknowledges that a smaller working-age population will result in a smaller tax base and that increases to PRSI could be used to mitigate the risks associated with this situation," it stated.

However, the current social protection system is a pay-as-you-go system, meaning that current PRSI contributions are used to cover current SIF expenditure. 

Acknowledging the so-called pensions timebomb, Mr Naughten wrote in his foreword to the report: "The State pension is an important part of Ireland’s social protection measures. It is an acknowledgement of the work people have carried out across society, whether in employment, in the home, or as a family carer. It helps to prevent many of those in receipt of the State pension from entering poverty, and enjoying a reasonable standard of living.

"However, the provision of the State pension is dependent on the collection of PRSI receipts. As the committee was informed, it is expected that the PRSI base will contract significantly over the coming decades, and this will affect the available funding."

To tackle this, the committee recommended that the development and application of new taxes on wealth be examined by the Commission on Taxation and Welfare.