Plans to revamp the State pension scheme, allowing people to work beyond 66 and earn higher weekly payments, are unlikely to be finalised for some months, with officials in the Department of Public Expenditure expressing concern at the potential costs.
The Cabinet Committee on Economic Affairs approved proposals in principle last week from Minister for Social Protection Heather Humphreys, which would see more flexibility on when people can take up the State pension.
Under the plan, workers could opt to stay in work after the age of 66 in return for higher rates of the State pension when they retire, up to the age of 70.
However, there are concerns about the potential costs over time of the changes and agreement is believed to be some way off. Senior sources said the issue would return to the committee in September for further discussion before a memo for Cabinet decision is finalised later in the autumn.
There are also concerns about the potential confusion of having up to five rates of the State pension, sources said, for people who retire at different points between the ages of 66 and 70.
[ The Government’s new pension plan: what will it mean for you?Opens in new window ]
Ms Humphreys’s plans aim to give people maximum flexibility but would require new legislation to ensure that employment contracts cannot — bar in specific cases — oblige people to retire before 66, the age at which they become eligible for the State pension. Employers will also be encouraged to offer people the option of working beyond this age.
Flexibilities in how pensions are drawn down also remain under discussion. These would include the option of retiring at 65 on a slightly lower State pension level. People who reach 66 without a long enough working history to qualify for a full pension may also be allowed to defer their payment and to continue working and paying PRSI, increasing their entitlements. Those who reach 66 with entitlement to a full payment may also be allowed to defer their pension and continue working, qualifying for a slightly higher pension on retirement at ages up to 70.
Ministers are seeking a final outcome which can be clearly communicated and does not lead to further controversy on the sensitive issue now or in future. The plan would involve some future increases in PRSI and may also involve accepting a Pension Commission recommendation that a specific amount of exchequer funding be set aside each year for payment into the social insurance fund, out of which pensions and other welfare payments are paid.
Sources say recent strong trends in employment and wages have helped to boost the fund in the short term, but it will come under pressure due to changing demographics as the number of retirees increases and the working age population diminishes over time.
