The State is facing significant challenges as it strives to meet its pension commitments over the next number of decades, the secretary general of the Department of Finance warned yesterday.
Separately, he also defended his department's record in forecasting tax revenue, despite comments by the Comptroller and Auditor General in which he noted that a review group had found the scale of deviation is high by international standards.
Addressing the Dáil Public Accounts Committee, David Doyle said the State's public pensions liability is currently estimated at €75 billion, including 300,000 people currently employed in the public sector and 95,000 public sector pensioners.
However, the ratio of people of working age in both the public and private sector to those over 65 is expected to fall from six to one to approximately two to one by 2050. Meanwhile, the cost of social welfare pensions will also treble by that year or by about €12 billion in present money, he said. Mr Doyle said the current annual bill for 95,000 public pensioners stands at approximately €2.5 billion, or 1.3 per cent of Gross Domestic Product (GDP).
But the percentage of GDP allocated to pensions is set to approximately double in 30 years "as the full impact of a significantly expanded public service takes hold", he said. "Demographic developments mean that pensions in general, whether in the public or private sector, will be a greater burden going forward."
These demographic changes will impact on the various schemes operated by the Department of Social and Family Affairs, with more than 450,000 people currently receiving either a State or widow/widowers pension.
Asked if Ireland should consider raising the retirement age, Mr Doyle suggested that the retirement age of 65 had been set at a time when life expectancies were lower. Society had become adjusted to the concept of early retirement, and whether it was possible to sustain that going forward is a "big issue", he said.
Tax revenues for 2002 to 2006 had exceeded the budget day forecasts by about 4 per cent on average, Mr Doyle acknowledged.There was a €1.8 billion shortfall in 2007, he added.
"Forecasts of taxes are not predictions of fact, and like all forecasts the actual position will inevitably differ," he said. "I would prefer to follow a prudent line rather than an imprudent one."
He added that his department has 10 accountants, and 600 staff, who earn an average of €60,000.
The comptroller, John Purcell, said the review group set up in late 2006 to examine the forecasting methodology had "found that while internationally Ireland's experience is not uncom- mon with regard to deviations between tax forecasts and outturns, the scale of the deviation is high by international standards".
He noted that among the factors in recent years had been stamp duty and capital gains tax returns.