People will be offered incentives to work beyond the traditional retirement age of 65 under new plans being considered by the Pensions Board to avoid widespread pensioner poverty, writes Laura Slattery
Minister for Social and Family Affairs Séamus Brennan said yesterday he wanted the board's review of national pensions strategy to assess the merits of giving employees who continue working past the age of 65 a pension bonus when they eventually retire.
The Minister cited the example of a new UK system where workers can defer their State pension up to the age of 70 and receive a bonus in their weekly pension payments for each year they postpone it.
"The reality is that men and women are living longer and leading more active lives in their later years. Working a few years more can make a real difference to income in retirement," Mr Brennan said at the launch of National Pensions Action Week.
However, the Minister said he believed working beyond 65 should be a matter of choice for workers and that not all people in that age group were fit and active.
Age Action welcomed the Minister's comments. "Nobody should be coerced to stay on just as nobody, in our view, should be coerced to go," said spokesman Paul Murray.
The organisation said the Government should allow workers to pick their own retirement date in consultation with their employer, rather than simply extending the "day of reckoning" until age 70.
Increased longevity is putting pressure on retirement ages across Europe. Irish men can now look forward to living for 81 years, while Irish women have a life expectancy of 84 years.
Pensioners are more at risk from poverty in the Republic than in most other western countries, with women especially vulnerable, according to an OECD study published last week.
Out of the workforce of two million, an estimated 900,000 people do not have a private or occupational pension to boost their incomes in retirement and will have to rely on the State pension.
Mr Brennan said the State pension of €179.30 a week was on course to meet the Government's target of €200 a week by 2007, but he admitted that the pension alone "won't keep you in any great comfort".
In an effort to stave off the "pensions timebomb", the Government is contributing 1 per cent of GNP to the National Pensions Reserve Fund, which has been set up to pre-fund social welfare and public service pensions from 2025.
The Government is also committed to a policy of encouraging more people to make additional savings through private schemes.
The Minister said radical solutions would have to be examined urgently as part of the Pensions Board's review, which was due to be submitted to his office in September.
The review was brought forward from 2006 amid growing concern that people are not heeding the Government campaign on pension provision.
Personal Retirement Savings Accounts, introduced in 2003 as a low-cost and flexible pensions option targeted at people in companies offering no occupational pension, the low paid and people outside the workforce, have failed to attract significant support.
Compulsory pension models will be examined under the review. The Minister said any compulsory pensions scheme should be split three ways, with the employee, the employer and the State contributing. Employees could opt out, but he believed few would do so as they would lose the benefit of the State and employer contributions.
With the youngest population in the EU, the Republic has longer than most countries to resolve its pensions problems.