The Government is to sign off on an overhaul of the State pension system that will see people who continue to work until they are 70 get increased weekly payments.
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 per cent more upon retirement, with payments rising by approximately 5 per cent for every year worked beyond 66.
As the Irish Examiner reports, based on the current State pension of €253.30, someone who works until they are 70 would get almost €315 per week.
The coalition party leaders have agreed to the changes, put forward by Minister for Social Protection Heather Humphreys, which will come before Cabinet on Tuesday, ending 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.
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.
Commenting on the proposals Siptu research officer Michael Taft said they are “a very positive step”.
Speaking to RTÉ Radio’s Today with Clare Byrne show, Mr Taft said any move towards a flexible pension system where people would not be forced to retire were welcome. The proposed changes were a vindication of calls from Siptu for some time, he added.
Aside from allowing workers to remain in employment for longer if they choose, Mr Taft said there should also be flexibility for people in “arduous” jobs who had made their full contributions, suggesting they should be allowed to retire and receive the State pension at 62-64.
Age Action’s Nat O’Connor said a multi-tier pension system could be a good approach for some workers, however, he warned there could be tax ramifications for others.
He said greater clarity is needed surrounding the proposed changes: “We all have a stake in getting this right, to have a decent income in old age.”