The emerging details of the proposed reform of the State pension system suggest that the Government is picking and choosing which recommendations it wants to take from the Pensions Commission report. This threatens a less than ideal solution.
Central to the well thought-out work of the commission was a balance which would be struck, particularly via its central recommendation. This was supported by all members, with the exception of the representative of the trade union movement who objected to the proposed increase in the age at which people would qualify for the State pension.
The Pensions Commission, chaired by Josephine Feehily, viewed the issue in the round, examining the ageing population, the long-term cost challenges this would bring and how the burden of providing the State pension could be shared in a sustainable manner. A key part of its central recommendation was a very gradual increase in the State pension age to reach 67 by 2031 and 68 by 2039. Built around this was a proposed structure based on the concept of social solidarity. This meant older people would take some of the burden via the later age at which they would – in future – qualify for the State pension, while the general population would chip in via higher rates of PRSI and a greater contribution to pensions from the general exchequer.
By removing one of the central planks – the very gradual proposed increase in the age at which people qualify for the pension – the Government looks set to put all the burden back on working people. Some other parts of the plan, as reported but not yet finally agreed, are welcome. The Government is correct to ensure employers do not force people to retire before the State pension age – there should and probably will be exceptions here – and to try to make the system as flexible as possible.
But the idea of allowing people already with full pension entitlements to work on beyond 66 and qualify for a bigger pension again looks like tilting the balance in favour of the older generation and people who are in the kind of jobs where a longer working life is possible. Final judgment will have to await the publication of the full plan, due in the Autumn. This should meet two key tests. The first is that whatever strategy is put forward is genuinely sustainable in the light of the ageing population. Ministers and officials are, it seems, still to finally agree on this issue. It is important that the recent rise in employment and earnings and the boost it has given to the Social Insurance Fund does not blur the longer-term issue.
The second test is that the new plan is fair. And here we come back to the concept of solidarity across generations in addressing this issue. From what we know, the latest proposals will come up short. There is still time to think again.