Irish Examiner View: Move toward resolution on pensions is paramount

The demographics of our population make the existing position financially unsustainable as those who are retired will surge mid-century
Irish Examiner View: Move toward resolution on pensions is paramount

The ratio of active workers per pensioner in the population is due to fall from its existing 4.5:1 to reach 2:1 in 2050.

Political reality is at the forefront of the far-reaching decisions affecting Irish pensions signalled by Taoiseach Micheál Martin during his trip to Japan, a country which, incidentally, has raised its own retirement age to 70.

Mr Martin has decided that the pension age in the Republic will remain at 66. But the demographics of our population make the existing position financially unsustainable. The ratio of active workers per pensioner in the population is due to fall from its existing 4.5:1 to reach 2:1 in 2050. The social insurance fund had a shortfall of €2.3bn in 2020 but this will be €21bn by 2070. By 2041, State pension expenditure alone will equate to the entire social insurance fund receipts.

This was why the Pension Commission recommended that the pension age should increase to 67 by 2031 and then to 68 by 2039, a proposal blocked in the Oireachtas who said it must not rise beyond its current 66. Siptu, Ireland’s largest trade union, warned Fine Gael that it would be “signing its political death warrant” if the pension age was changed.

The Oireachtas and the unions got their way. While Mr Martin says there needs to be a “flexible” approach and there are “different ways of meeting sustainability in Ireland”, the likely consequence is an increased tax burden which will fall most heavily on those who stay longest in employment. For quite how long younger taxpayers — who have already suffered a worldwide financial crash, a pandemic, and the worst economic crisis for 40 years — are willing to shoulder the responsibility for funding the benefits of retired people without protest is a ticklish political problem for the future.

It is fundamentally correct to insist that there should be no age for mandatory retirement, although the opportunities to take advantage of this will naturally vary according to the type of work.

It also makes no sense when so many companies and services are finding it difficult to recruit or retrain staff to fulfil roles, many of which can be seasonal, or which fall short of a full working week. Just over two months ago, Fáilte Ireland launched a marketing campaign specifically attempting to attract retirees into the hospitality and tourism sectors.

Flexibility in matters of taxation of benefits, or the nature of the rewards themselves, must also be more imaginative. Many roles, particularly where they relate to small businesses, are not well remunerated and many are done for reasons of interest and stimulation. It would be self-defeating if the Department of Finance clawed back the earnings of pensioners who decided to go on past normal retirement age. Incentives must be part of the package. The suggestion that people who work to 67 receive an enhanced pension might be one of those, but there are others. It is important to move this matter along to resolution.

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