Higher State pension proposed for those who work beyond 66

People who choose to work beyond retirement age of 66 will get higher pension for each extra year in employment

The Cabinet is on Tuesday likely to approve a new system for the State pension, confirming the retirement age at 66 but allowing people to work until 70 if they choose.

The costs of the system will be met by increases in PRSI but these will not be set until next year, pending an actuarial review of the social insurance fund, and are likely to be incrementally added to the tax bill from 2024.

Minister for Social Protection Heather Humphreys will bring proposals to Tuesday morning’s Cabinet meeting for approval and is likely to announce the details of the new system afterwards.

It is expected the plans will follow the political direction given by Coalition leaders over the summer and maintain the retirement age at the current 66 but allow people to work until 70 if they wish, earning a higher pension the longer they stay in work. It is understood the increase per year of extra work will be of the order of 5 per cent.


Details of the extra PRSI contributions, which may be levied on both employers and employees, will not be decided until next year. An actuarial review of the social insurance fund – from which pensions are funded – will commence later this year and be completed in spring of next year, following which decisions about PRSI increases may be made in next year’s budget.

There will be no PRSI increases in next week’s budget. The review of the social insurance fund will be repeated every five years.

The plan represents a rejection of the recommendation of the State-appointed Pensions Commission which last year recommended an increase in the qualifying age to 67 by 2031 and 68 by 2039 – a move which had been flagged by the Coalition parties over the summer.

The pensions issue is viewed by the Government as a political minefield. While rising life expectancy is pressuring pensions systems all across the western world, there is strong opposition among older voters to increasing the pension age. One Government source said on Monday night that the plans were an acknowledgment of “political reality”.

It is also expected that the new system will introduce a new model for people who are forced to retire early.

Meanwhile, intense discussions on next week’s budget are continuing in Government with the three party leaders, along with Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath, meeting on Monday night after Taoiseach Micheál Martin’s return from the funeral of Queen Elizabeth in London.

Sources said final decisions on the cost-of-living package, which is likely to include billions of euro in supports for households and businesses to be paid in the coming months, are not likely to be made until later this week. Work is understood to be continuing on a complex system of supports for firms which will seek to limit the impact of energy price increases on viable businesses.

The separate budget decisions, which involve recurring, annual spending commitments in areas like social welfare, education and health are also likely to be made in the coming days.

A bilateral meeting on the budget between Mr McGrath and Ms Humphreys – who heads the largest-spending department – is scheduled for Tuesday evening.

While no decisions are yet made, it is understood that the likelihood of an across-the-board €15 welfare increase, sought by many NGOs and lobby groups, is receding. Such a move would cost €1.1 billion, taking up the lion’s share of funds available for spending increases across a range of departments.

However, substantial once-off welfare payments – possibly involving a double payment of pensions, unemployment benefit and children’s allowance – are likely, according to people involved in the process.

Pat Leahy

Pat Leahy

Pat Leahy is Political Editor of The Irish Times