Pensions row fix could threaten future of State payment, actuaries warn
FG and FF reverse positions on upping pension age and now support transition pension
Actuaries say “significant” increases in PRSI needed to keep paying pensions at 65.
The Society of Actuaries, whose members specialise in assessing future risk in areas such as pensions, says it is important that any return of the transition pension to calm voter anger ahead of the general election can only be a temporary measure.
“A permanent transition pension arrangement would represent a failure to address the reality of the situation,” they say.
During the campaign, both Fine Gael and Fianna Fáil have reversed their previous positions on the rising age at which people qualify for the State pension, committing to bring back the transition pension – payable at the same rate as the State pension – for workers forced to leave their job before the State pension kicks in.
Other parties have proposed even more dramatic moves to reverse the process.
Legislation passed in 2011 saw the abolition of the transition pension in 2014 with the State pension age becoming 66. It is due to rise to 67 in 2021 and 68 in 2028.
The actuaries accept that the 2014 change “created difficulties” for those whose employment contracts forced them out of work at 65 regardless of circumstances. This forced many to apply for means tested jobseeker’s allowance, which the actuaries describe as “a temporary, incomplete and unsatisfactory solution” that will become “even less appropriate when the State pension age is due to become 67”.
The society has proposed that one solution would be to allow people to draw a reduced State pension early.
It notes that the most recent actuarial audit of the Social Insurance Fund – into which PRSI payments go and out of which pensions and other welfare payments are made – says that “significant” increases in PRSI would be needed to keep paying pensions at 65.
The society has argued consistently that pension age must rise gradually to make the State pension system affordable and sustainable. It notes that the Government’s pensions roadmap proposes that any further changes to the State pension age should be directly linked to increases in life expectancy. The plan is that this would be assessed in 2022 and every five years thereafter, with a notice period of 13 years or more before additional changes are introduced.