Increasing pension age, to moderate the increase in pension duration, is a means by which pensions can be made sustainable in the context of increasing longevity. In order to provide for sustainable pensions and to facilitate a longer working life, legislation passed in 2011 provides for an increase in the State pension age in three separate stages. In 2014, the State pension age was standardised at 66. This will be increased to 67 in 2021 and 68 in 2028. The Roadmap for Pensions Reform 2018-2023 has stated that future changes in State pension age after 2035 will be based on research into life expectancy. This is in keeping with similar measures introduced by most EU and OECD countries.
This sustainability is vital, if the current workers, who fund State pension payments through their PRSI, are to receive a pension themselves when they reach retirement age. It is the only feasible solution which does not involve reducing pension rates to pensioners (which would result in an increase in the rate of poverty among older people), or reducing other significant areas of Government expenditure (such as other payments made by my Department).
It is estimated that the gross cost to the State Pension (Contributory) of postponing the increase in State Pension Age would be approximately €430m per annum, but the net cost is closer to €217.5 million per annum. The estimates factor in secondary costs such as foregone PRSI receipts and additional Household Benefit payments.
Therefore the estimated net cost for the period 2020 - 2026 would be over €1.5 Billion.
I hope this clarifies the matter for the Deputy.