The Government’s plan to keep the State pension age at 66 while increasing PRSI contributions has received a mixed welcome from industry experts. Consumer advocate Brendan Burgess described the proposals as “nonsense”, suggesting the Coalition was tinkering rather than fixing the problem.
“The current system where contributions go into one large Social Insurance Fund to pay out Jobseeker’s Benefit and contributory old-age pension [OAP] is completely unsustainable,” Mr Burgess said. “Tinkering with the contribution rates or retirement age will not fix the problem,” he said.
To make the fund sustainable the Government would have to significantly increase PRSI contributions or significantly reduce the amount of contributory OAP, or significantly increase the retirement age or adopt a combination of those measures, he said.
“Politicians keep deferring these solutions. The net result will be that we will be forced to make the contributory OAP subject to a means test,” Mr Burgess said.
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Under the proposals, the State pension age will remain at 66 with a new “flexible” model introduced allowing for increasing payments on the basis of working longer.
Umbrella group Brokers Ireland welcomed certain aspects of the plan but raised concern about how it would be funded. “Brokers Ireland welcome the flexibility to allow individuals to work later in life and achieve a higher state pension in retirement, but noting the comments around the review of PRSI contribution next year, we are concerned about the cost. There is already increasing pressure on the state pension in Ireland because of an ageing population,” the group’s director of financial services Rachel McGovern said.
Sebastian Barnes, chair of the Irish Fiscal Advisory Council, made similar soundings.
