‘Modest’ PRSI hikes to pay for pension reform
No increased insurance contributions planned in next week’s Budget
FUTURE PRSI increases needed to fund the pension pot will be ‘modest’, Social Protection Minister Heather Humphreys has vowed.
While it is unclear how much PRSI will increase by, the Fine Gael TD said that an increase of just 0.1% would yield an extra €210 million a year.
This would result in people paying an average of 67c per week (€34.84 per year).
Ms Humphreys confirmed yesterday that the State pension age will remain at 66 but that a ‘new flexible’ system will be introduced that will allow people to retire between the ages of 66 and 70.
The longer a person works, the bigger their weekly pension will be. For every extra year a person works, they will receive an extra €15 per week.
This could result in someone who works until they are 70 getting a pension worth €3,120 more than someone who retires at 66.
As part of the new plan, a fiveyear actuarial review of the PRSI system will be launched in December.
Ms Humphreys is expected to bring forward proposals for PRSI by the end of April.
However, she stressed yesterday that she had to be ‘upfront and honest’ about the fact that there will have to be increases.
There will be no increases to PRSI as part of the Budget being announced next Tuesday.
Government sources said that the tax may not have to be raised as part of next year’s Budget either.
Ms Humphreys said there is currently a surplus of €3billion in the Social Insurance Fund.
One senior minister told the Irish Daily Mail yesterday that the fact that there are so many people at work means that the pension ‘black hole’ that had been predicted may not materialise.
The changes will apply to the State contributory pension. A person’s contributions will be based on their entire working life rather than on a yearly average.
The non-contributory State pension will remain as it is.
Nat O’Connor, senior public affairs and policy specialist at Age Action Ireland, said that the organisation welcomed the fact that people will be given the choice of working for longer if they want to.
However, he warned that the new system risks social ‘solidarity’.
‘Whether or not this is the right decision for you as a person will depend on your current income and your age, where you’re working,’ he told the Mail.
‘It’s not going to be straightforward and it might undermine a sense of solidarity that we are all in this together and there is a State pension and we can all get the full rate.
‘Now people are saying, well, what is the full rate? Is it the rate at 66? Is it the rate at 70? It is already confusing for people.’
Mr O’Connor explained that around 80,000 people over the age of 66 are working in Ireland. Around 25% of them are farmers. Others are renters who cannot afford to retire.
However, he said there is another group of ‘white-collar professionals’ with jobs that enable them to continue working for longer. This includes GPs and lawyers.
‘It’s not unusual to see a GP or a doctor or a lawyer who’s still working into their 60s and 70s,’ he said.
‘It seems to me likely that these pension proposals are going to be more beneficial to higher earners, whereas your typical worker, working in a shop or working on a building site or working in all sorts of other places or middle-income jobs, it’s really not going to be straightforward deciding when to retire,’ he added.
The pension plan was also criticised by the opposition parties yesterday, with Sinn Féin president Mary Lou McDonald describing it as a ‘scam’ and a ‘Trojan horse’.
Ms McDonald accused the Government of ‘moving the pension age to 70 by stealth’.
‘More beneficial to higher earners’