Major reforms of State Pension system announced

The State Pension Age will remain at 66 and people are to be given the choice to continue to work until the age of 70 in return for a higher pension.

Those are among the major elements this morning of a reform of the State Pension system announced this morning by Minister for Social Protection Heather Humphreys.

The set of reforms agreed today include:

Maintaining the State Pension Age at 66 and introducing a new flexible pension age model;

From January 2024, people will have the option to continue working up until the age of 70 in return for a higher pension;

As recommended by the Pensions Commission, move fully to a ‘Total Contributions Approach’ for calculation of individual pensions entitlements on a phased basis over 10 years starting in January 2024;

There will be enhanced State Pension provision for long-term carers to be introduced from January 2024. This will mean, for the first time, people who have to give up work over a long duration to look after a loved-one will have their time spent caring recognised in the pension system’;

The Department of Enterprise, Trade and Employment will introduce measures that allow, but do not compel, an employee to stay in employment until the State Pension age;

Workers will be provided with access to a PRSI contribution statement service each year in a manner that enables them to understand their entitlements;

The long-term sustainability of the State Pension system will be addressed through gradual, incremental increases in social insurance rates over time;

The level and rate of increase in social insurance rates will be determined on a structured basis every 5 years informed by the outcome of a statutory actuarial review.

A committment to explore the design of a scheme that would modify the current Benefit Payment for 65-year-olds to provide a benefit payment for people who, following a long working life, 40 years or more, are not in a position to remain working in their early 60s;

Following today’s Cabinet meeting, Minister Humphreys said:

“The measures agreed by Cabinet today represent the biggest ever structural reform of the Irish State Pension System.

“We know that people are living longer and healthier lives which is hugely positive. At the same time, everybody’s job and circumstances are different so we need to move away from a ‘one size fits all’ approach to the pension age.

“That is why from 2024, Ireland will move to a new ‘flexible pension age’ model, similar to the systems in place in a number of other EU countries.

“Under this new model people will continue to be able to retire and draw their pension at 66 exactly as they can today. In addition, for the first time, people will now be given the choice to continue working beyond 66 in order to receive a higher pension payment.

“This new system will put the power in people’s hands and give them the choice in terms of what best suits their own circumstances.”

Minister Humphreys continued:

“I’m pleased too that Government has agreed to a number of other really important proposals.

“Over the next ten years, as recommended by the Commission on Pensions, we will move to a Total Contributions Approach, ensuring that people’s pension rates are based on the number of years they have worked and paid contributions.

“This will be a crucial step in ensuring our State Pension System is sustainable into the future and will help deliver a more fair and equitable system for our citizens.

“As part of the move to the Total Contributions Approach, we will provide a pension to long-term carers from 2024.

“Given the sacrifice that carers make and the contribution they make to society, I believe it is only appropriate that we should enable them to access the State pension and I am very pleased to get Government support for this proposal.

“I am pleased that Government also supported my proposal to explore the introduction of supports for people who for various reasons cannot continue working into their early 60s. These proposals will be worked on over the coming months and will be modelled on the Benefit Payment for 65 year olds that I introduced following my appointment as Minister for Social Protection.”

Minister Humphreys continued: “Thankfully due to the strong performance of our economy and record employment, the social insurance fund is expected to have a surplus at the end of this year.

“At the same time, we do need to plan for the future. Accordingly, action is needed to sustain the system.

“That is why Government have today agreed to review social insurance rates in a structured manner. This will be done every 5 years with the level and rate of increase based on the outcome of a statutory actuarial review.”

The Current State Pension is paid at the rate of €253 per week for people who retire at 66.

Under the proposed flexible model, and based on current payment rates, the five rates are estimated to be as follows:

Age 66 - €253

Age 67 - €266

Age 68 - €281

Age 69 - €297

Age 70 - €315

These figures are for illustrative purposes only and are based on current pension rates. They do not take account of any budgetary changes prior to the introduction of the flexible pension system in January 2024.