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Pension Age - should it stay at 66?

  • 01-07-2022 7:15pm
    Moderators, Science, Health & Environment Moderators Posts: 18,856 Mod ✭✭✭✭

    The Taoiseach has said he believes the State pension age should not go beyond the age of 66, saying there is a "clear groundswell" within his party to retain it.

    Micheál Martin said this would have "clear implications for PRSI" and that extra contributions would be needed to ensure the pension age was not increased.

    Of course, that would be fine if the age of the population was not increasing with those over 66 living to a much riper age than their parents did (or are still living to).

    Surely there is a better formula that can be devised to reduce the future burden on the PRSI fund.

    Perhaps remove the notion of a single age for retirement, while having a flexible age at which the state pension can be drawn down. People should be allowed to retire at any age between 60 and 70 without being forced to remain at work till it suited them. Currently, some employment forces retirement at 65 - whether that suits or not.

    State pension could be structured so that early retirement means a lower state pension till 70, or late retirement means a deferment of state pension, meaning a larger pension when it is taken up. Obviously, the actuaries would calculate the numbers to make sure it balances out fairly.

    If the state pension qualification remains fixed at 66, then those working will be paying pensions to a larger and larger number, which will be a real burden - possibly unsustainable.

    So what to do?



  • Registered Users Posts: 81 ✭✭spontindeed

    We don't need to increase PRSI. We could easily get the money by retroactively probing the tax affairs of big multinational corporations for potential windfall back taxes. I remember reading in the Indo that an Irish subsidiary of Abbott Laboratories made a profit of €1.8 billion in 2011 but paid no tax because it wasn't resident here for tax purposes.

    The Apple Tax appeal should also be dropped and the Government should take the money. Other European Countries have retroactive taxation powers and I see no reason why we should be any different. The project fear narrative of "companies will leave if we do xyz" doesn't really bother me because the way I would look at it: is a multinational corporation really going to relocate to cheaper eastern European countries where there is geo-political tension with Russia? If so, good luck!

    PRSI should not be increased on employees anyway, rather it should be increased on employers because a lot of corporations here don't pay the full 12.5% corporate tax rate so it's only fair that they be forced to pay higher employer PRSI. But as always, the current Government parties haven't got the courage to do this so I think the next election will be important in terms of fair taxation.

    Post edited by spontindeed on

  • Registered Users Posts: 32,138 ✭✭✭✭is_that_so

    The deals for these large MNCs were agreed with Revenue at various points so there is no need nor justification to probe them. The Apple money is not ours, it more likely belongs to the IRS and other countries. If you increase PRSI on employers you make workers more expensive anyway and reduce potential company profits. That may not be a big deal for MNCs but companies who employ under 10 people make up the bulk of SMEs in Ireland.

  • Registered Users Posts: 81 ✭✭spontindeed

    Apple paid a 0.005% effective tax rate in Ireland so I think the Apple Tax isn't too much to ask. That's hardly going to throttle employment

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  • Registered Users Posts: 81 ✭✭spontindeed

    That doesn't preclude the power to retroactively change these tax arrangements with Revenue if necessary. It can be in the public interest or it can use various ECJ rulings over the years as a precedent. A precedent has already been set.

    The Apple Tax money is ours, the European Union said that Ireland can use the Apple Tax money on public services and no other EU Country has yet made claim to any of it either. Furthermore, it was never repatriated to the us. I hope the next election results in a clear-out of the current Government parties so that a new Government will ensure fair taxation and the Apple Tax appeal dropped and the state taking full control of this money.

  • Registered Users Posts: 81 ✭✭spontindeed

    The pension levy on public servants scrapped by Noonan just before the 2016 election should be reinstated as another possibility.

  • Registered Users Posts: 32,138 ✭✭✭✭is_that_so

    That's Revenue's ball and they see no need to do so. They regularly review tax payments and arrangements with MNCs. The Apple money is not ours and even when it is resolved it will be subject to IRS claims on all of it. Our taxation system is already progressive and fair but I guess you favour the magic money tree approach. The options you support also want to do away with the €4bn of USC and the €550m of LPT that goes into the Local government fund. Their solution is to get all the rich people and MNCs to pay more tax, despite the inherent warnings of basing our tax income on such a minute base and potential OECD reforms on FDI.

  • Registered Users Posts: 81 ✭✭spontindeed

    The Apple Tax money is ours, the European Union said that Ireland can use the Apple Tax money on public services and no other EU Country has yet made claim to any of it either. Furthermore, it was never repatriated to the us. So I think it's fair to say it IS ours.

    Anyway, the European Commission can still use technical rules to force multinationals to pay more tax where unanimity with member states is not possible like they did when they reviewed Revenue's tax arrangement with Apple.

  • Registered Users Posts: 818 ✭✭✭whatawaster81

    Just on a personal level. I don't think I'll be afford to retire at 66. So I'm in favour of increasing it a couple of years.

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  • Registered Users Posts: 1,068 ✭✭✭Caquas

    Don’t confuse the European Union with the European Commission. The Commission has campaigned for decades to undermine our economic model. When they didn’t get the power to control corporation tax, they claimed our tax arrangements were “state aid”, something they can control. The EU’s Court of Justice slapped the Commission down for that stunt in 2020. The Commission is appealing but, as things stand, Apple has paid its taxes due in Ireland.

  • Registered Users Posts: 81 ✭✭spontindeed

    It's not normal when a multinational corporation like Apple pays a 0.005% effective tax rate in Ireland.

    The project fear narrative that our investment will suffer when a multinational corporation doesn't get a tax deal so they relocate to cheaper eastern European countries where there is Geo-political tension with Russia, possible but unlikely.

    Post edited by spontindeed on

  • Registered Users Posts: 32,138 ✭✭✭✭is_that_so

    Nobody will or can make any claim until the case is settled and claiming something is true does not make it it so. What technical rules are these now? The EU has no national tax competencies and recently agreed OECD rules on global taxation of at least 15% now supersede them. If anything Alphabet et al will agree to be taxed more in country, which really ruins your simplistic little plan .

  • Registered Users Posts: 11,767 ✭✭✭✭PopePalpatine

    Good luck avoiding a backbench rebellion - let alone survive the next election - if you adopt this policy. Remember the pensioners' protests after the Troika arrived? That was just over some medical card cutbacks, just imagine if the headline figures of the pension were touched.

  • Registered Users Posts: 34,660 ✭✭✭✭BorneTobyWilde

    Luxembourg pension age is 60, with a miniumum rate of 1841 euro per month, and a top rate of 8500 per month.

    We could copy that 😁

  • Registered Users Posts: 4,461 ✭✭✭Topgear on Dave

    It will likely stay at 66 or somewhere about that. You'll have some careers trades etc that simply cannot go on past a certain age.

    There will have be a very large block of older voters with pensions able to outvote the younger still working voters. The effects will be interesting.

  • Registered Users Posts: 9,804 ✭✭✭Jim_Hodge

    They require a minimum of 480 monthly contributions of 24% gross income to the government’s fund for state pensions. The average pension payment is €3500 per month

  • Registered Users Posts: 34,660 ✭✭✭✭BorneTobyWilde

    3500 is a nice average . A long way from Ireland

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  • Registered Users Posts: 9,804 ✭✭✭Jim_Hodge

    Would people pay 24% of gross for 40 years though?

  • Registered Users Posts: 34,660 ✭✭✭✭BorneTobyWilde

    Huge wages there though,. so people pay in

  • Moderators, Category Moderators, Arts Moderators, Business & Finance Moderators, Entertainment Moderators, Society & Culture Moderators Posts: 18,139 CMod ✭✭✭✭Nody

    Sounds like they are ripped off honestly and here's why:

    Average salary in Luxemburg as per google is $65,854 a year or $5,488 a month as of the OECD numbers from 2020. 24% gross would mean that they pay in $1,317 a month for their pension. Input that in a compounding calculator with 7% growth (which is below average historical returns for stock, S&P 500 1926 - 2020 averaged 10% yearly as comparison) over 40 years and you'd end up with $3,155,033. Now that's your retirement fund value at your 40th year as you retire. If we then apply the 4% rule (i.e. you can take out 4% of the value of your portfolio and it will last in principle for ever due to the 7% average growth) you'd be able to take out $126,201 a year or $10,516 a month which is close to 2x your salary in pension. Hence a state pension that's below your average salary before retirement after 40 years of contributions at 24% gross is a very bad deal.

    Post edited by Nody on

  • Registered Users Posts: 9,804 ✭✭✭Jim_Hodge

    You're all over the place. Compare the Irish pension badly to theirs and then point out their working wage is much higher. It still requires 24% for 40 years to pay for it. Apply that here (even with a bigger pension payout) and see how it'll be greeted. The point is, if people want a decent state pension they'll have to contribute more. If they want to rely on only the state pension and not work beyond 66 then they'll have to pay towards it.

    Get yourself a decent private pension pot.

  • Registered Users Posts: 1,228 ✭✭✭The Mighty Quinn

    Hi Jim, I've no idea about Luxembourg and you seem to, just wondering then if they pay a quarter gross to pension each month, is this tax deductable, and do they pay 50%-ish on remainder of gross? i.e., is their net take home pay some 37-40%?

  • Registered Users Posts: 9,804 ✭✭✭Jim_Hodge

    It's not that simple. They have a very long graduating rate from €11000 onwards. But as an example, an earner on €55000 pa pays about the same income tax as here on top of their pension contribution. You have to take account of tax credits before you bandy about your 50%-ish.

    The bottom line is if you want a decent state pension and to retire mid 60s then you, or somebody, has to pay for it.

  • Registered Users Posts: 12,563 ✭✭✭✭Danzy

    Luxembourg also has a tiny population Where citizenship is guarded, valued and closely controlled.

    Most of the people working in Luxembourg do not live in it.

    It's not of any relevance to the debate on pensions elsewhere.

  • Registered Users Posts: 81 ✭✭spontindeed

    There needs to be a permanent public sector pensions levy.

    I remember reading that the public sector pensions deficit was €200 billion but that it was being accounted for OFF BALANCE SHEET!

    Also, the Government could tax gratuities/lump sum retirement payments of retiring public servants. It is crazy that a retiring public servant gets a €100,000 lump sum payment when they retire. But again, the Government hasn't got the courage to do this. So they will just target ordinary private sector workers. If Government attempts to auto enroll me in a private pension, I will opt out (you will only have 6 months to opt out under the current proposals). I work in the private sector.

    Post edited by spontindeed on

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  • Registered Users Posts: 28,038 ✭✭✭✭Wanderer78