State pension age to be set at 68 by 2028 in radical overhaul of qualification structure
AN INCREASE in retirement age over the coming decades was confirmed yesterday at the launch of the National Pensions Framework.
In 2014, the State pension age will be increased by one year to 66. In 2021, the State pension age will be set at 67 and in 2028 it will be set at 68.
Minister for Social and Family Affairs Mary Hanafin confirmed Government had decided to increase the pension age in three stages: “If you are aged between 50 and 55 you will not retire until you are 67. If you’re aged 49 or under, you’ll be working until you’re 68. This reform will . . . help us to sustain the pension system for future generations.”
Taoiseach Brian Cowen said longer periods of retirement required support by extending working lives. Moreover, the cost of future pension provision had to be fairly shared across the generations.
“In common with other EU member states which have embarked on pension reform, the framework proposes a gradual increase in the retirement age over the coming decades,” he said.
An “auto-enrolment” scheme would provide a mechanism for maximising pension coverage, particularly among those on lower incomes, involving a contribution by the individual, the State and their employer, the Taoiseach said.
Mr Cowen said a radical rethink of pension policy was now necessary because while there were about six people at work to support every pensioner, by 2060 that figure would be less than two. “The inescapable truth is that we either provide for our own pension needs or we ask our children and grandchildren to bear the full cost. I believe we must ensure that the burden of provision is spread fairly across the generations.”
Ms Hanafin said “inertia and procrastination” were the main reasons cited by people for not taking out pensions and the “auto-enrolment” scheme would provide a way of overcoming this. People could opt out if they wished, citing the example of a couple saving for a house, but would be automatically re-enrolled every two years.
“For every two euro that the employee invests in the pension scheme the employer will invest one euro and the State will invest one euro. And in the same way as you could see with your SSIA, you will be able to watch your pension fund growing.”
Ms Hanafin said Government would endeavour to maintain the value of the State pension at 35 per cent of average wages. Women who took time out for caring had previously been disadvantaged, she said. Social insurance credits would be introduced for people who take time out of the workplace for caring duties.
She said it was 100 years since the State pension was introduced in Ireland at a time when average life expectancy was 50 and pension was payable from the age of 70.
Now average life expectancy was 76 for men and 81 for women, and was expected to increase by another eight years over the longer term.
Minister for Finance Brian Lenihan said account had to be taken of Ireland’s “growing ageing and greying population” and a pension system developed that was financially, economically and socially sustainable.
He said Ireland still had a relatively young population, but demographic changes would bring many challenges in future.
There was a moment of levity after Mr Cowen had left the press conference when Mr Lenihan and Ms Hanafin were asked about people aged 49 or under who would have to working until the age of 68.
“It’s a large group of people which includes the Taoiseach but it doesn’t include Minister Hanafin or myself,” Mr Lenihan said.
Mr Cowen is 50, while the Ministers are very slightly older. Ms Hanafin added: “Having said that, we would like to advise the Taoiseach that we would like to continue working in whatever capacity he’d like us to work in now for the next number of years.”