Large hikes to PRSI rates will likely be needed to keep the pension age at 66, the State’s fiscal watchdog has said while raising concerns that the plan to fund the Coalition’s new pensions policy “may not be credible”.
Sebastian Barnes, the chair of the Irish Fiscal Advisory Council (Ifac), said the decision not to raise the pension age means higher taxes will be needed to ensure the system is sustainable.
“The pension system in this country faces major challenges on sustainability and today’s decision, which loads resolving that on higher taxes so heavily, may not be credible,” he said.
The watchdog said “large PRSI increases are likely” — with Minister for Social Protection Heather Humphreys agreeing they would increase — but only gradually.
“I’m being very straight here, we will have to increase PRSI, but I think that we’re going to be able to do it in a more gradual way,” she said on Tuesday.
The scale of PRSI increases, as well as who will be hit with them, will not become clear until next spring when the government plans to publish a roadmap, informed by an actuarial review of the stability of the social insurance fund (SIF) — the pot of money that pays the State pension.
Mr Barnes said the Government had not provided adequate information about the design of the scheme, its costs or how many people are projected to take it up.
“These are big decisions. The Government should know how much things are going to cost before it proposes them,” he said.
The Coalition on Tuesday announced a sliding scale for pension payments, with higher rates available to those who work until the age of 70. This will be cost neutral, while other interventions were welcomed by trade unions and stakeholder groups — particularly moves to improve pension access for carers, address issues facing those who have physically demanding work, and move to a “total contributions” approach which the Government said would save billions in the coming decades.
Senior sources believe widespread increases for workers and employers will be needed — with an across-the-board hike of 0.1 per cent per year on all PRSI contributions raising in the region of €210 million per annum. However, the increases will only come “when needed”. Ms Humphreys said actuarial reviews would be done every five years to determine what PRSI contributions needed to be, arguing it was a more precise system than relying on long-term projections.
She also signalled that previously-shielded income, such as earned income for those over the age of 66, would be considered for PRSI. Sinn Féin spokeswoman on enterprise Louise O’Reilly said that a worker who deferred their pension until age 70 “means you’d have to live well past 82 to make back the pension forgone while working”.
