Forced retirement in private sector faces Pension Commission review

Former Revenue chairwoman Josephine Feehily will head review on state pension age and related issues

Minister for Social Protection Heather Humphreys, who has secured Cabinet approval for the new Pensions Commission

Minister for Social Protection Heather Humphreys, who has secured Cabinet approval for the new Pensions Commission

 

Private sector companies that force workers to retire onto unemployment benefit payments at 65 face examination under the new Pensions Commission.

The commission, put in place to address widespread public concern about the rising age at which people can access state pensions, was approved by Cabinet on Tuesday.

It was agreed in the programme for government after the state pension age emerged as a key issue at the general election.

The retirement age for the purposes of state pension rose from 65 to 66 in 2014 and was due to rise again, to 67, in January – and then to 68 in January 2028. The Government has frozen those planned increases pending the outcome of the commission.

The commission will examine how to fund the state pension in future years, including what age it will be payable, how many PRSI contributions will be required and how much that will cost the State.

But Minister for Social Protection Heather Humphreys said its wide ranging terms of reference also include an examination of how private sector employment contracts specifying retirement ages below the state pension age might be adversely hitting the State’s welfare bill and pension system.

Working lives

Governments have warned since 2016, when it published the Report of the Interdepartmental Group on Fuller Working Lives, of a problem with companies forcing workers to retire before the state pension becomes payable.

Minister for Finance Paschal Donohoe noted at the time that if increases in the age at which people qualify for state pensions were not matched by longer working lives, future incomes for retirees will become an increasingly pressing issue.

In the private sector, many companies have a mandatory retirement age written into their employment contracts – and in most cases that is 65.

Although employers’ group Ibec welcomed the 2016 report, few companies have yet done anything to amend the terms and conditions of their employment contracts.

The terms of reference raise the prospect of the Government unravelling its previously announced reform of how people qualify for the state pension – even before those reforms have been fully implemented.

In 2017, the government announced a move to a “total contributions system”, where entitlement to a full pension would require 40 years of contributions at any point over a working life, of which up to 20 years could be credited Home Caring contributions for time taken out of the workforce to care for family.

However the terms of reference include an examination of eligibility criteria and pension calculation as well as contribution rates and rates at which the pension would be paid.

The commission will also address the sustainability of the state pension amid concerns that Ireland’s aging population could make automatic entitlement to a state pension unaffordable for governments in the future.

It will look at state pension systems in other countries and any proposed recent reform of those systems, as well as examining a series of reports on the Irish state pension system commissioned over the past decade .

It will also consider how pension provision can be made for those who have been out of work for long periods to care for incapacitated dependents.

“We hope it will be in a position to report back to Government in June, the end of June,” the Minister said.

Failure to increase the pension age next January will cost the exchequer €220 million next year and would cost if more than twice that – €453 million – in a fully year.

The Department of Social Protection said that Ireland’s aging population means that the cost of providing the state pension is rising by €1 billion every four or five years.

A total of €8.8 billion has been allocated by Government for the payment of state pensions next year. That amount to 38 per cent of the social welfare budget. Ten years ago, pensions accounted for only 29 per cent of the department’s budget.

Membership

The commission will be chaired by former Josephine Feehily, who has served previously as chairwoman of both the Revenue Commissioners and the Policing Authority.

The other members of the commission are: barrister Ita Mangan, who as formerly chairwoman of the advisory group on tax and social welfare; actuary and Pensions Council member Roma Burke; economists Seamus Coffey and Dr Aedín Doris; Jack Keyes, former Cavan county manager who is the principal advisor to Age Friendly Ireland; Ian Power, the former president of the National Youth Council of Ireland who works with young people as CEO of not-for-profit Spinout.ie; John McGrane, the director-general of the British Irish Chamber of Commerce; and Anne Vaughan, former deputy secretary general of the Department of Social Protection and a former member of the Pensions Authority.

Employers group Ibec and the Irish Congress of Trade Unions have yet to nominate one member each.

Ms Humphreys noted that women would form a majority of the commission membership.

“This sends out an important message,” she said, “given the commentary recently about the lack of women in positions of authority. The issue of pensions particularly affects women and I’m very conscious of that.”

The commission will seek the views of “recognised experts and representative/advocacy groups”, the Minister said.