Q&A: Why has the pension age question suddenly become an election issue?

Pensions have blown up as an election issue over the weekend, with parties scrambling to address voter concerns about being left in limbo – denied access to the State pension for two or more years after they retire at 65.

Sinn Féin has raised the political temperature by promising to lower the age for the State pension back to 65 while Labour leader Brendan Howlin is on record as saying that anyone seeking the party’s support in government would have to halt any plans to further increase the State pension age to 67. The other parties are promising measures in their manifestos. But what is the problem and how has it suddenly arisen?

What is the row about the State pension about?

Back in 2011, in their first year in government, the then Fine Gael-Labour coalition legislated for the phased increase in the age at which people could access the State pension. The age was increased to 66 from 2014, rising to 67 from January 1st, 2021, and to 68 from January 1st, 2028.

So, if you were born between 1955 and the end of 1960, you will not get the pension until you turn 67; if you were born on or after January 1st, 1961, you will have to wait until you are 68.

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Why was there no fuss at the time of the first increase – to 66 – back in 2014?

At that time, there was a transition payment called a State Pension (Transition) – more commonly known as a retirement pension. It kicked in at 65 if you had actually retired. In 2014, when the pension age rose to 66, that transition payment was abolished but anyone who had retired at 65 before then would not have experienced any gap in payment.

So what happens if you retire from your job at 65?

Anyone retiring before they can access the State pension now has to apply for Jobseekers’ Benefit. This is a payment available to people who are unemployed but have a steady social insurance/PRSI record. However, it requires that you are (a), capable of work; and (b), available for and genuinely seeking work. That’s not what most people retiring expect to have to do.

Why are people so annoyed?

There are two reasons, really. First, it’s a matter of money. The maximum weekly payment under Jobseekers’ Benefit is €203 – and that only lasts nine months. After that, your payment will be means tested. With the State pension, you can receive up to €248.30 a week.

A second, and not insignificant, issue is more personal. Many people object to being obliged to apply for unemployment welfare payments. They have worked all their lives without needing to rely on welfare and do not see why they should be forced to on retirement instead of receiving a pension for which they have been paying PRSI all their working lives.

What is the difference in financial terms?

It’s fairly stark – €45.30 a week or more than €2,350 a year. By not being able to access the State pension, a retiree is losing almost a fifth of the income they would expect.

And if they have an adult dependant, it gets worse. The maximum allowed for a dependant under Jobseekers’ Benefit is €134.70. With the State pension, it is €165.40, and that rises to €222.50 if the dependant is 66 or older.

Why did this happen?

People are living longer and the cost of the pension is becoming a bigger problem for the State. When state pensions were originally introduced (in Germany), few people reached the set age of 65, and those who did tended not to live for very long thereafter. Now, most of us are living into our 80s.

Regular reports on the social insurance fund – into which PRSI payment go and out of which the State pension and other welfare benefits are paid – have warned that it will run out of money because of the increased cost of pensions.

This is not just an Irish problem – many other countries have also raised their pension age.

How many people are affected by it?

About a quarter of all workers will rely entirely on the State pension for their income in retirement, according to research from the Central Statistics Office published earlier this month. That one-in-four figure includes public sector workers, where occupational pension coverage is close to 100 per cent. The figure of those relying on the State pension alone is closer to 40 per cent among private sector workers.

So what are the parties offering to do?

Political parties seem to have been taken by surprise at the strength of feeling on the doorstep as they canvass for votes. Pensions are one of those things few people think about until they have to, but 2021 is less than a year away and certainly whoever wins the election will have to address the issue.

Both Fine Gael and Fianna Fáil are promising measures to address what they call "anomalies" in the present system. For Fine Gael, Taoiseach Leo Varadkar is promising the reintroduction of some form of transition pension to bridge the gap. Fianna Fáil leader Micheál Martin is talking about outlawing contracts that force people to retire before they can access the State pension.

For its part, Sinn Féin is promising to turn the clock back by making 65 the State pension age. And Labour has said that it is “ non-negotiable for anyone seeking our support after the election that the rise in the State Pension age to 67 in 2021 be stopped”.

What’s this transition pension the Taoiseach is talking about?

We don’t yet know the details. They might be in the Fine Gael manifesto when it is published. When it previously existed, it was paid at the same rate as the State pension. The difference was that you could not claim it if you were working more than a few hours a week, whereas there is no block on people working while receiving the State pension.

Can you work in a different role if you are required to retire at 65?

There’s nothing to stop people continuing to work after 65 even if their current employer forces them to retire from that particular job. However, many companies are slow to hire people at that age and it could require a large degree of re-training.