Pension Age - should it stay at 66?

Sam Russell

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?

spontindeed

https://www.boards.ie/discussion/2058252679/pension-age-should-it-stay-at-66

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.

Atlantic Dawn

It should be reduced by about €75 a week and left at 66. Current payment amount is unsustainable with people living longer and our much lower birth rates due to massive house prices.

Caquas

https://www.boards.ie/discussion/comment/119280493#Comment_119280493

I used to think that the fable of the Golden Goose was too absurd to be credible. What farmer would strangle a goose that was making him rich?

But Ireland is full of people who want to get their hands around the throat of our golden goose and give it a good throttling.

And not just the Apples and Googles which have made us the envy of every small country aspiring to high-tech development. No, many like Spontindeed want to throttle anyone who gives employment!

is_that_so

https://www.boards.ie/discussion/comment/119280493#Comment_119280493

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.

spontindeed

https://www.boards.ie/discussion/comment/119280538#Comment_119280538

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

spontindeed

https://www.boards.ie/discussion/comment/119280579#Comment_119280579

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.

spontindeed

https://www.boards.ie/discussion/comment/119280526#Comment_119280526

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

is_that_so

https://www.boards.ie/discussion/comment/119280640#Comment_119280640

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.

spontindeed

https://www.boards.ie/discussion/comment/119280690#Comment_119280690

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.

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.

Caquas

https://www.boards.ie/discussion/comment/119280734#Comment_119280734

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.

Caquas

https://www.boards.ie/discussion/comment/119280640#Comment_119280640

Of all the goose-throttling stunts we could pull, retrospectively changing our tax laws would be most lethal to our economic development.

Picture the IDA trying to explain that away to prospective investors! “Trust us, we will only raise our tax rate on you just a little bit. Just enough so we can all retire at 66. And cross my heart, no matter what, we won’t be tempted to up your tax rate for any other reason. Mica? What mica?”

That precious pipeline of investment projects would dwindle to nothing within a year.

Sarn

https://www.boards.ie/discussion/comment/119280653#Comment_119280653

I’ll bite. It wasn’t scrapped, the PRD has now been replaced by the Additional Superannuation Contribution (ASC).

spontindeed

https://www.boards.ie/discussion/comment/119280838#Comment_119280838

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.

is_that_so

https://www.boards.ie/discussion/comment/119280734#Comment_119280734

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 .

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.

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 😁

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.

Jim_Hodge

https://www.boards.ie/discussion/comment/119281649#Comment_119281649

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

BorneTobyWilde

3500 is a nice average . A long way from Ireland

Jim_Hodge

https://www.boards.ie/discussion/comment/119281721#Comment_119281721

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

BorneTobyWilde

Huge wages there though,. so people pay in

Nody

https://www.boards.ie/discussion/comment/119281682#Comment_119281682

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.

Jim_Hodge

https://www.boards.ie/discussion/comment/119281747#Comment_119281747

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.

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%?

Danzy

It's shameful populism to keep the pension at 66.

It's unsustainable, that's the blunt reality. How the Govt addresses that is open but pretending that the pension as is isn't completely unsustainable is delusional.

Jim_Hodge

https://www.boards.ie/discussion/comment/119282977#Comment_119282977

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.

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.

spontindeed

https://www.boards.ie/discussion/comment/119280915#Comment_119280915

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.

Wanderer78

ubi......done!

Sam Russell

The pension age of 66 has been captured by the political populists - whose main interest is to get votes. The more the pragmatic politicians rail against it, the more the populists crank up their mantra.

The only way the pragmatists than build a bulwark against this mantra would be to remove the absolute age of 66 and make it flexible - anyone can retire early or late, but the state pension will be less for those that retire early. No mandatory retirement age, and the state pension is dependent on PRSI contributions.

By following such a regime, a sustainable model could work, but paying state pension out of current contributions is definitely unsustainable as the number getting the state pension rises.

Jim_Hodge

https://www.boards.ie/discussion/comment/119283279#Comment_119283279

You know you can contribute to a pension fund and get your tax free lump sum too?

spontindeed

https://www.boards.ie/discussion/comment/119282979#Comment_119282979

Not really when you compare the generous public sector pensions to the private sector (public sector pensions levy is needed). The other day I read that Micheal Martin is to throw more money at the public sector under the pretext of 'pay restoration' (why do politicians call it that given it was never sustainable in the first place).

Also, when you look at the sweetheart tax deals offered to big corporations in Ireland, the retirement age could be restored to 65.

titan18

Retirement age should increase tbh especially with people living longer. Should move to 68 at a minimum imo.

Wanderer78

https://www.boards.ie/discussion/comment/119283338#Comment_119283338

theres actually no need for this at all, people spend long enough working, they should be able to retire at an appropriate age, to enjoy the remainder of their life in relative peace

The Mighty Quinn

https://www.boards.ie/discussion/comment/119283178#Comment_119283178

I don't disagree. I'm paying 20% to pension at the moment, maxing out on relief.

I'm in favour of auto enrollment. You can't trust people to plan for their own future...

Wanderer78

https://www.boards.ie/discussion/comment/119283637#Comment_119283637

...or what happens if current workers require all of their earnings to meet their current needs!

The Mighty Quinn

https://www.boards.ie/discussion/comment/119283649#Comment_119283649

There's that argument, but honestly I think many people spend too much unwisely. Not all. There are genuine cases, but people who've over extended on loans for example, instead of buying a 10K car have bought a 25K car, locked in to repayments for 5 years at over 300 a month, and that's not one bit uncommon. Then these people complain there's nothing left every month after bills and groceries, ignoring some of that outgoing is of their own making from a year or three ago.

Danzy

https://www.boards.ie/discussion/comment/119283318#Comment_119283318

So remove all the corporate tax breaks. Half the public services pension rate.

Pension at 66 is still unsustainable.

If it was only slightly unsustainable ...

Wanderer78

https://www.boards.ie/discussion/comment/119283666#Comment_119283666

...theres clearly something fundamentally failing at policy level in regards critical needs such as health care and property needs, yes people do spend unwisely, but theres clearly something fundamentally wrong in regards these critical needs, we cannot keep pointing the finger at individuals, while simply ignoring such needs, theres clearly something fundamentally failing! again, 'behind ever bad borrower, is a bad lender'!

Nody

https://www.boards.ie/discussion/comment/119283732#Comment_119283732

I see; so it's not personal responsibility that people go eat fast food daily it's the system. It's not individual responsibility when people sit at the pub complain about lack of money every night; it's the system's fault. Sorry but responsibility start at the individual; that includes fiscal as well as voting in the appropriate people to government to enact the policies. Blaming this on "oh but it's a system issue" is removing the blame from where the actual ownership sits; which is the individual. This is as well the reason politicans such as Farage, Boris etc. got where they got in the first place by offering a handy "system issue" to blame it all on over individual responsibility. People get the government they deserve as the saying goes; got an issue with government policy then look at the electorate who voted them in for who to blame and who has the power to change it.

Wanderer78

https://www.boards.ie/discussion/comment/119283779#Comment_119283779

...you gotta love conservatives, they ll really die with this stuff, wont they!

....once again, we dont live on this prefect planet, whereby we can all just provide ourselves with our needs, and to add insult, in an environment of rising wealth inequality(what we re experiencing right now!), this is further impeded, or this causes further issues in regards 'social mobility'!

...it really is time for us to grow up in regards such nonsense now!

Nody

https://www.boards.ie/discussion/comment/119283803#Comment_119283803

I agree on the growing up; the only difference is I actually believe that voters should decide rather than as you appear to think that the state should decide everything for the voters without input. Yes; there's inequality and plenty of it; you know who decides who's in government? The voters. You know the people I'm holding accountable for deciding who's in government and the policy said government executes. Are you claiming that poverty somehow stops someone in Ireland to go vote (I'd fully agree if we talked about the USA which is disgraceful in it's implementation as a side note)? That being poor means you can't cast your vote or tell the politicans (and there are plenty of them) who comes around knocking on the door to convince you that they are the people who should represent you? I actually think adults, who at least according to the law are suppose to be capable of making their own decisions, should actually be held accountable to you know, make decisions on their own and live with the consequences of making decisions. Novel idea and if that makes me conservative then sure, what ever rings your bell I guess.

JoChervil

I think retirement should be voluntarily from certain age like for example from 60. If you retire at 60 you would be paid less weekly, than average, if you retire at 66 you would be paid full amount and if you retire later, you would be paid more respectively.

I think people should have a choice, if they would prefer to have more money or more free time.

Wanderer78

https://www.boards.ie/discussion/comment/119283829#Comment_119283829

...oh dont worry, thats gonna happen very very soon, it clearly obvious that this government is toast, in particular the main parties, but what extent of damage will be done by then, particularly in relation to our most critical sectors, and will it be possible to change this!

...its also understandable why many dont vote, as does it really matter, and does our political systems truly exist for all peoples needs, or for only certain interest groups! maybe these folks seem to think so, maybe.....

...in order for people to have a fair crack of the whip, things kinna need to be reasonably fair to begin with!

Sam Russell

Personal responsibility only goes so far.

The political system changes the balance of personal choices. Making pension funds tax exempt should tip the general worker to contribute to a pension fund. However, high rents and very high property prices reduce disposable income that would allow such contributions. Now there is an opt-in so that more will subscribe.

Personal spending is a personal choice. Some save to spend in the future, while others borrow to spend now. Your current income and future income should be a guide. Living a champagne lifestyle on a lemonade income can only lead to poverty as debt catches up. If borrowing gets out of control, then the future can be grim. The same applies to pensions. The state pension can never be sufficient to provide a 'good lifestyle' but is only a safety net.

If the state pension age does not increase as the average age of the population increases and those retired getting the state pension increases, then the following choices apply.

1. The Gov increases PRSI to pay for it, but lower proportion working will mean an ever increasing PRSI charge.
2. The state pension is reduced in real terms, which pushes the lower fraction of recipients into poverty.
3. The state pension is means tested - if you do not need it, you do not get it, like the non-contributory one.
4. Income tax or other taxes must rise to pay for an ever increasing cost of the state pension.

The electorate will choose - or not.

The electorate will choose and we"ll have an extremely large block of older voters.

So it'll be option 1 with option 4 and cutbacks in day to day spending like education which won't be required by an ageing population.

They'll also have an interest in keeping property prices fairly spicy because for many property is a pension investment.

Loafing Oaf

https://www.boards.ie/discussion/comment/119283909#Comment_119283909

It's obviously going to be some combination of 1 and 4 because any party that even tentatively proposed 2 or 3 would be obliterated at the ballot box...

Geuze

https://www.boards.ie/discussion/comment/119283279#Comment_119283279

There is.

The PRD was made permanent, this has already happened.

It is now renamed the Additional Superannuation Contribution (ASC), and it is permanent.

It is 10% of wages above 34k.

HerrKuehn

There needs to be honesty from the government around "raising the pension age", what they are really talking about is raising the private sector pension age. It will have no impact on the amount or timing of pension payments to current public servants.