Raising the rate of pay related social insurance (PRSI) for self-employed people to help fund a delay in the rise of the State pension age could damage efforts to get people back to work after the pandemic, according to Minister for Finance Paschal Donohoe.
Fine Gael has set out its opposition to a proposed PRSI hike for the self-employed. But the party has not said how it would fund changes to the pension regime that would mean the rise in qualification age from 66 would not begin until 2028.
The Pensions Commission has delivered its report to Minister for Social Protection Heather Humphreys. It was established to examine the pension regime after it became a significant issue in the last election.
The commission is recommending that the pension age begins to rise to 67 in quarterly increments from 2028 and would ultimately go to 68 by 2039.
It had been due to rise to 67 from the start of this year.
One proposal being advanced by the commission to help fund the delayed increase in qualification for a State pension is an increase in PRSI for the self-employed – from 4 per cent to 11 per cent.
Fine Gael is opposed to increasing the rates for this group.
However, Mr Donohoe did not say if his party favoured a more widespread PRSI rise or tax increases to fund any changes in the qualification age.
He said the issue of pensions is sensitive issue in the context of the economy and for generations to come that will rely on the pension to maintain their standard of living.
Mr Donohoe said choices will have to be made “But I do think you have to put the proposed increase in PRSI in the context of where our economy stands at the moment. We’re trying to get our self-employed back to work . . . we have to be aware that any big sudden change in the taxes that they are paying could really have a negative impact on our ability to create work.”
Put to him that he was not outlining how Fine Gael would fund the delay to the increase to the pension age, he insisted it is “reasonable” for the party to outline its concerns.
He said the ways that the sustainability of the social insurance system can be dealt with will be outlined once the commission report is considered.
Ms Humphreys said she hopes to bring the report to a Cabinet sub-committee meeting at the end of the week.
She said there’s a host of recommendations in this report and she didn’t want to pick one out in particular.
“We have to look at it in its totality . . . I want to bring it to my Government colleagues. We have six months then after it’s gone to Government to discuss it and there are some very difficult decisions we’re going to have to make.”
She added: “What we want to do is protect the State pension so that young people who start their working lives today will get the same benefits as those who retire today or tomorrow. And that’s really at the heart of the of the decisions that we need to make.”
Ms Humphreys said the current situation with the pension system is “not sustainable”.
Budget and debt
Asked if she will be pushing for an increase in pension payments in the budget she replied that her focus will be on the “vulnerable” and she is conscious that “there hasn’t been an increase in social welfare payments in the last two years. I’m also very conscious that the cost of living is going up.”
Fine Gael is promising social welfare and tax packages in the upcoming budget.
Mr Donohoe was asked if this is prudent given the country’s level of debt.
He noted plans for a two-budget strategy that aims to end borrowing for day-to-day spending by 2023.
Mr Donohoe said any measures announced on budget day will be within the parameters outlined in the Summer Economic Statement.
He said this “envisages a very steep reduction in our borrowing between this year and next year, followed by another reduction in borrowing the year after that”.
He said Fine Gael’s plan for social welfare and tax packages is about trying to help workers and vulnerable people keep up with the cost of living. He said “it will be affordable and will all be inside the context of reducing borrowing”.
Mr Donohoe said he could not offer details of any special bonus for frontline healthcare workers to acknowledge their work during the pandemic.
