Live longer, work longer: how the pension changes will affect you
With the State pension age moving up to 66 next year and to 68 thereafter, planning for your retirement has become more important than ever
Life expectancy is also expected to rise substantially, leaving the State on the hook for longer.
For a person who retires at 65, this means that they could have 24 years to fund in retirement.
For Maguire, the cumulative effect of these changes means that the State “will not be able to sustain the payments to pensioners”.
“If you can afford to do so, you should turn a blind eye to the State pension. Any money you get from the State will be a bonus”.
When will you retire?
Born on or after January 1st 1948 – retirement age 66 – change in 2014
Born on or after January 1st 1955 – retirement age 67 – change in 2021
Born on or after January 1st 1961 – retirement age 68 – change in 2028
Change in pension age around the world
Australia – From 65 to 67 by 2023
Denmark – From 65 to 67 by 2027
Germany – From 65 to 67 by 2030
UK – From 65 to 69 by late 2040s, and possibly up to 70
Spain – From 65 to 67 by 2027
US – From 66 to 67 by 2022
How An Post is responding to the change
Faced with a deficit in its retirement fund of some €320 million, An Post has embraced the change in the State pension age.
For the postal group, the longer employees work, the more money that will be generated to help narrow its deficit. In an agreement it reached with trade unions during the summer, it has extended its retirement age to 66 from January, 67 from 2021 and 68 from 2028.
But, while employees will be working longer, it won’t mean that they will be able to earn more towards their pension.
With a maximum pensionable service of 40 years, working with An Post for 45 years will ensure you get the maximum pension available – but you won’t get any more than if you had worked for 40 years.
On the other hand, for staff who joined An Post with less than 40 years to the typical age of retirement, the move allows them build up some extra pensionable service.
For employees looking to retire before the new retirement age, it will still be possible to do so after the age of 60 – but at a reduced pension rate.
Take the example of someone on a salary of €40,000 retiring at the age of 65. Until now, 40 years of service would have given them a lump sum of €60,000, plus a pension of €20,000 a year. If they were to do that now, they would receive a reduced pension of €18,700 a year, and a lump-sum of €55,080.
Not only that, but if they were to retire after 2028 they would have to survive on just €6,724 for the first three years until the State pension kicks in.
On the other hand, waiting until you’re 68 will give you the same entitlements as you previously got at 65.
Other agreed proposals include a maximum increase in pensionable remuneration of 2 per cent.
The changes to An Post’s pension scheme remain subject to approval by the Pensions Board.