Much has been said in recent weeks about the impact of the looming pensions crisis on “Generation Rent”. This comes in the wake of the Government’s plan to leave the pension eligibility age at 66, thus ignoring the recommendations found in the Commission on Pensions’ thoughtful report of last year, which suggested a gradual increase to the eligibility age. Instead, the issue is being fudged with planned PRSI rate rises and initiatives to incentivise workers to work longer by choice.
Some do not seem to realise quite how great the potential fiscal burden of the increasing numbers of pensioners will be. Models suggest that the Social Insurance Fund’s annual deficit will grow to €2.36 billion in 2030, €8.56 billion in 2040, and €13.35 billion in 2040. These deficits will be driven by the growing cohort drawing a State pension. Future taxpayers will pay for these deficits. And those future taxpayers are Generation Rent.
They will be asked to shoulder the burden of another of Ireland’s policy failures, as pensions join the housing and climate crises in an ignoble triumvirate.
What is most frustrating about this policy debacle is that Sinn Féin, Fianna Fáil and Fine Gael know that this change is inevitable. It will have to happen eventually
In concrete terms, this will mean less money available for the educational needs of our children, less money for the new roads and hospitals which we will need, and less money for the State to provide welfare when we find ourselves without a job. Today’s pension policy choices will make us distinctly poorer tomorrow.
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Two sequential scenarios seem to stretch out before us.
First, if politicians cannot deal with this problem today, with a very young population, then it will become progressively more difficult as the share of the grey vote grows and grows. We may be stuck for many years with a State fiscally biased towards the retired.
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Secondly, the State will eventually find itself too burdened with both the State pension and growing healthcare demands of older citizens and be forced to course correct quickly. Rather than the route suggested by the commission, which would involve a gradual increasing of the pension age over several decades, we may be forced to change it quickly. Thus, instead of large sections of society putting their shoulder to the wheel and accepting slightly higher pension eligibility ages, it is our generation who will ultimately have to work to 70 and beyond, while those who go before us escape that fate. The parallel with climate change is clear.
After Sinn Féin leader Mary Lou McDonald infamously telling us, during the last general election, that the “demographics will look after themselves”, it seems the previous policy consensus around increasing the pension age has collapsed. Following Sinn Féin’s effective deployment of this issue in the last election, Fine Gael and Fianna Fáil are now too frightened by older voters to enact the policy change that they know the country needs.
This is not to say that it is an easy policy choice. The politics of pensions are controversial. For instance, there are obvious concerns about how to deal with those who work physically demanding jobs. It is easy for me, a lawyer, to say everyone should work slightly longer. It is not as easy for someone who has spent a life on their feet. Countries, such as Italy, have tackled this problem by creating differential retirement ages for those who work strenuous jobs, allowing them to retire early. Rather than having that nuanced, difficult debate, our politicians are instead blanket refusing to raise the retirement age.
What is most frustrating about this policy debacle is that Sinn Féin, Fianna Fáil and Fine Gael know that this change is inevitable. It will have to happen eventually. The sooner we do it, the more equitably it can be managed, but today’s politicians do not want to be the ones to impose it.
What are generation rent to do? No matter Sinn Féin’s rhetoric that it is the party for generation rent, it is clear that no big party is ready to comprehensively protect our interests
Countries across Europe have accepted the unavoidable implications of an ageing population. For instance, Denmark has instituted a policy mechanism that will progressively move the pensions eligibility age up as life expectancy increases.
Do any of our political parties really think that Ireland be any different?
Sinn Féin’s role in this is especially cynical. It has ridden the wave of Generation Rent’s anger at the housing crisis to the brink of political ascendancy (and rightly, as its policies to tackle the crisis are the boldest). But all the while the party has one eye to the grey vote and has weaponised pensions in a manner that will doom Generation Rent to a different crisis in the coming decades. By then, McDonald will have left the political stage, no doubt on a generous taoiseach’s pension, while Generation Rent come to terms with her, Micheál Martin and Leo Varadkar’s political cowardice.
What are generation rent to do? No matter Sinn Féin’s rhetoric that it is the party for Generation Rent, it is clear that no big party is ready to comprehensively protect our interests.
Instead, Generation Rent needs to strike out and support a political party willing to fight for us.
Eoin MacLachlan is a barrister practising in London