Paschal Donohoe: Any change to pension age must be 'affordable and sustainable'

Oireachtas committee proposes State pension age should not rise beyond the age of 66

Paschal Donohoe: Deficits in the social insurance fund will have serious consequences. File picture

Finance Minister Paschal Donohoe has warned any change to the pension age must be “affordable and sustainable” and not threaten the formation of budgets.

Speaking during an interview with the Irish Examiner in response to an Oireachtas committee report which recommended not increasing the pension age, Mr Donohoe warned deficits in the social insurance fund will have serious consequences.

The Oireachtas Committee on Social Protection made a series of landmark recommendations on Wednesday, including proposing that the State pension age should not rise beyond the age of 66.

This is at odds with the report of the Pension 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.

“Whatever we do does need to be sensible from a budgetary perspective, and that is the tone that the Government will take in dealing with the decision,” said Mr Donohoe.

“It's just important for me that when we make a decision in relation to this, it is sustainable. Clearly, any decision that we make here will impact on where we are with the social insurance fund.

“For the social insurance fund to be consistently in deficit undermines the ability of that fund to deliver against the social needs of citizens and has a really big impact on how you put together a budget to meet the needs of today,” he warned.

“So when we make our decision in relation to this, it has to be sensitive to the issues facing us, but it's also critical for me that it is sustainable and that it's affordable in the years to come.” 

'An open mind'

Earlier, the Taoiseach said the Government has "an open mind" on the recommendation to keep the qualifying age for the State pension at 66.

The Taoiseach was pressed on the issue during Leader's Questions on Wednesday by Labour TD Brendan Howlin. It was previously planned to raise the pension age to 67, due to come into effect from January 1, 2021. However, the Government deferred the change awaiting the outcome of the commission report.

"This cross-party committee of the House, which looked at the facts, is unconvinced that the gradual increase in the pension age would have any meaningful impact on the fiscal position of the social insurance fund," said Mr Howlin.

The Taoiseach said there was an "enormous issue facing society because we're living longer" but added "it's a good thing" that people are living longer with better health outcomes.

Micheál Martin added that the cabinet sub-committee will examine the pensions issued after the publication of the Commission on Taxation and Welfare. That report is likely to be published at the end of March.

"I have an open mind genuinely, the Government will approach this with an open mind. I think the commission did very detailed work, genuine bonafide work that will feed into the Oireachtas work, it has examined that and is fiscally sound," he said.

"There is no point pretending to future generations that we've left them short, that this generation has not devised policy responses that guarantee and sustain pensions well into the future and decades ahead, that is a core, and has to be a core objective of the entire house.