Pensions report heralds end to ‘normal’ retirement age of 65

Retirement at the age of 65 is increasingly impractical, a new Government report argues. It says workers and their employers need to accept that working for longer is both necessary and desirable.

Publishing an interdepartmental report on work and retirement, Minister for Public Expenditure and Reform Paschal Donohoe said the Government would encourage the private sector to allow workers to continue in employment beyond the traditional “normal” retirement age of 65.

His department and public service employers will also review “barriers to extended participation in the public service workforce”. The Minister noted changes to public service employment rules in 2013 mean recently recruited staff can avail of a maximum retirement age of 70.

The interdepartmental group was commissioned to find a way to bridge the financial gap between the time people retire at 65, or earlier, which is still the norm, and the payment of State pensions at the age of 66. In five years’ time, this will be pushed out further, to 67, and to 68 by the year 2028.

Eligibility

The notion of a “retirement age” needs to adjust, at least in line with planned increases in the age of eligibility for the State pension, the report states.

At present, anyone retiring, or forced to retire by their employer, may apply for jobseeker’s benefit until they turn 66. The maximum benefit payable, €188 a week, is €45 less than the State pension.

"It is clear that 65 has been and, to a large extent, continues to be regarded as a de facto threshold between working life and retirement," the report states. "These cultural 'norms' need to evolve. A framework that facilitates working to, and beyond, the State pension age should be the new 'norm' for both workers and employers."

The Minister emphasised the incentives available to older people who remain in employment and said more would be done to make workers aware of them. These include enhanced tax credits and PRSI exemption.

State pensions

Spending on State pensions is expected to jump by more than a third to €8.7 billion in 10 years time, from €6.5 billion last year. The public service pension bill, which this year is expected to be €2.9 billion, is a further cost on top of that.

An average of 20,000 people are expected to reach the pension age of 66 every year between now and the end of this decade.