Tuesday, 24 November 2020

Questions (568)

Claire Kerrane


568. Deputy Claire Kerrane asked the Minister for Social Protection the estimated projected pension expenditure based on demographic cost estimates in each of the years 2020 to 2030, in tabular form.; and if she will make a statement on the matter. [38376/20]

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Written answers (Question to Social)

Population projections indicate that Ireland will undergo significant demographic changes between 2020 and 2050. As a result of demographic pressures, the number of State pension recipients will continue to rise. This has significant implications for the future costs of State pension provision. Sustainability is vital if the current workers, who fund State pension payments through their PRSI contributions, are to receive a pension themselves when they reach retirement age.

The Actuarial Review of the Social Insurance Fund, as at 31 December 2015, was published in September 2017 and highlighted Ireland’s rapidly altering age structure. The Review covered a 55 year period from 2016-2071. The Review emphasised that long-term projections are based on a wide range of assumptions about the future. The focus was on the trends which emerge over the projection period of the Review and on the relativities between various items of income and expenditure rather than on the results for individual years.

The Review indicated that the percentage of the population over State pension age was projected to increase from 12% in 2015 (when State Pension Age was 66 years), to 17% in 2035 (when the State pension age was expected to be 68 years) and to 23% in 2055 (again on the basis that the State pension age expected to be 68 years). It is also projected that the pensioner support ratio will decline from 4.9 workers/person over State Pension Age to 2.9 in 2035 to 2.0 in 2055.

Furthermore, the Irish Fiscal Advisory Council (IFAC) published its “Long-term Sustainability Report: Fiscal challenges and risks 2025-2050” in July 2020. This report provides the IFAC’s assessment of the long-run sustainability of the public finances in Ireland and demographic projections for the coming decades to 2050. The economic projections were formed on the basis of consistent macroeconomic and demographic underpinnings and assumptions. This report indicated that Ireland faces a rapid pace of ageing. It projected dramatic growth rates for older-age population cohorts. Age groups below 65 are set to see modest increases over 2020?2050, while older cohorts will increase much more markedly. The population aged 65–79 will expand by 88% and the 80+ population will expand by 240%.

Based on modelling conducted earlier this year, the following table sets out estimated increases in expenditure directly related to the demographic changes in the pension population for the period 2021 to 2025. These estimates are based on a State Pension Age of 66. These demographic pressures alone mean that total expenditure on pensions over the five years from 2021 to 2025 will increase by an extra €5.5 billion approx., without any payment rate increases.

Additional Annual State Pension Expenditure From Demographics 2021-2025 (€ Billions)







Increase caused by demographic growth in numbers (€bn.)






Modelling increases in pension expenditure on an annual basis beyond 2025 has not yet been done to this level of detail and requires a comprehensive examination of demographic changes and actuarial probabilities.

As the Deputy is aware, the Government has approved the establishment of a Commission on Pensions. The Commission’s Terms of Reference includes a review the projected changes in demographics, earnings and the labour market, and associated costs. In line with the Programme for Government, the Commission will report to Government on its work, findings, options and recommendations by 30th June 2021. The Government will take action having regard to the recommendations of the Commission within six months.

I hope this clarifies the matter for the Deputy.