Planning ahead for most of us probably doesn’t go much further than next year’s summer holiday or putting a few bob away for a rainy day.
Worrying about where we’ll be in thirty years’ time doesn’t generally feature in most conversations.
This may partly explain why it’s only now that the extension of the qualifying age for the State Pension to 67 next year has become such a big issue in the election campaign.
It’s happening next year. That concentrates the mind.
Many people hitting 65 are contractually obliged to retire from their jobs.
And those who don’t have a private pension – and that’s just under two thirds of those working in the private sector – will have to rely on unemployment benefit until the State pension kicks in, currently at 66.
As politicians of all stripes have been finding out, many people think this is unacceptable.
This hasn’t come out of the blue.
The idea of extending the qualifying age for the State Pension was first mooted in a Green Paper on Pensions published in 2007. It was eventually introduced in 2011 in the depths of the financial crisis.
It’s important to note that the thinking behind the move was there before we plunged into the nightmare of the Crash.
One of the reasons noted then is that Ireland’s youngish population by European standards meant we were enjoying a situation where six people were working for every one retired person. But by 2050, it was and still is, more or less thought there will be less than two people working for every retired person.
That’s a massive sea change in our society with profound implications for our economy. In simple terms, how will we pay for healthcare, housing and, of course, pensions?
Lots can happen in thirty years. We may get an influx of immigration or a burst of fertility. But we can’t depend on either of these potentially interesting developments.
I’ll wager that more of us will be working for longer. We need more of us to be paying into the system for longer. That part of the equation has been left behind in the debate.
In 2017, the Citizen’s Assembly concluded that the mandatory retirement age should be abolished. The outgoing government’s Pensions Roadmap says the issue should be kept under ‘close review’ and that it will “…consider the merits of restricting the capacity to use mandatory retirement provision relative to the prevailing State pension age…”
Given the current furore over pensions, it seems inevitable now that mandatory retirement ages in employment contracts will come under serious legislative scrutiny whoever wins the election.
Of course, that’s not the only issue.
Pensions, whether they’re private or state, how they’re designed, how they’re invested, how they’re taxed, all of this is about to become one of the predominant issues in the economy in the coming decades.
The State pension currently costs the Exchequer just over €8.4 billion a year. That cost is going up by approximately €1 billion every four years. That’s without any change to current policy or rates. It’s fine while the Social Insurance Fund (that’s where your PRSI contributions go) can handle it but one day it won’t.
After this election, don’t let anyone tell you pensions are boring.