pension plan | 

New finance minister says jobseeker’s hike will be stalled to keep pension age at 66

Michael McGrath says Fine Gael plans on pay-related welfare system will have to wait

Finance Minister Michael McGrath says proposals from Social Protection Minister Heather Humphreys (above) to introduce three rates of Jobseeker’s Allowance based on a worker’s pay before they lost their job are “worth exploring”. Photo: Gareth Chaney© Collins Dublin, Gareth Chaney

Philip RyanIndependent.ie

Keeping the pension age at 66 will be prioritised over reforming the welfare system to link Jobseeker’s Allowance to pay, according to new Finance Minister Michael McGrath.

The Fianna Fáil minister said that plans from coalition partners Fine Gael to introduce a pay-related welfare system will have to take a back seat to the contentious pensions issue.

In an interview with Independent.ie, Mr McGrath insisted that the “first call” for revenue raised by increasing PRSI over the coming years is to “protect the pension age”.

“If we’re looking at other reforms of social welfare we have to be clear as to where the funding for those are going to come from,” he said.

“Because the first draw from the resources raised from PRSI increase will have to be to protect pension age and address that gap which would otherwise emerge,” Mr McGrath said.

He said proposals from Social Protection Minister Heather Humphreys to introduce three rates of Jobseeker’s Allowance based on a worker’s pay before they lost their job, are “worth exploring”.

“But we will need to know exactly what the cost is of any such scheme, and how we’re going to fund it,” he added.

Under Ms Humphreys’ plan, a worker with five or more years of PRSI contributions would be entitled to 60pc of their gross weekly salary if they lose their job. This would be capped at €450 per week for six months.

Michael McGrath says he's happy to continue working alongside Public Expenditure Minister Paschal Donohoe but will bring his “own style” to the Finance role. Photo: Steve Humphreys

A worker with between two and five years’ worth of PRSI contributions would be entitled to 50pc of their gross weekly salary, or up to €300 per week.

Anyone with less than two years of PRSI contributions would receive the current rate of €208 per week.

In terms of pensions, a subject which has long been a political landmine, Ms Humphreys has also drafted a plan.

This would see the State pension age remain at 66, but anyone retiring beyond that age will be offered a larger weekly pension.

A person who retires at 70 will be entitled to €315 a week if they have paid the necessary PRSI contributions while a 66-year-old will get €253.

Mr McGrath said he believes the Government decided on “the right plan” on the pension age but said “difficult decisions” will have to be made on how to fund the major reform of the welfare system.

“I think people do recognise the value of having certainty about the age at which they will be able to get a State pension and I think people are prepared to pay for that,” he said.

“It is the price that we all collectively will have to pay as a society for not increasing the pension age as we live longer, thankfully, into the future,” he added.

Separately, Mr McGrath said he would continue to ease the tax burden on middle income workers in future budgets but only if the national finances allowed him.

“We have made progress in the last three budgets in that respect and, of course, it would be my objective to continue to make progress in line with the Programme for Government, but it will always be guided by the resources that are that are available,” he said.

The Government introduced tax cuts worth €1bn in Budget 2023 – bringing the entry point for the top rate of tax of 40pc for all earnings over €40,000.

Taoiseach Leo Varadkar said he wants to increase this to all earnings over €50,0000.

Mr McGrath said he expects to reimpose budgetary spending rules next year which limit the amount of expenditure the Government can make in the Budget.

Finance Minister Michael McGrath says proposals from Social Protection Minister Heather Humphreys (above) to introduce three rates of Jobseeker’s Allowance based on a worker’s pay before they lost their job are “worth exploring”. Photo: Gareth Chaney© Collins Dublin, Gareth Chaney

They were loosened this year to take into account record levels of inflation and the impact of the energy crisis sparked by the Russian invasion of Ukraine.

“We received support from the fiscal Advisory Council and others in relation to that and it was a necessary move but it would be our intention, subject to the inflationary environment, to revert back to that medium term fiscal strategy which the Government adopted, which involves reinstating that spending rule, which broadly means your core spending grows at about 5pc per annum,” Mr McGrath said.

He said he is happy to continue working alongside Public Expenditure Minister Paschal Donohoe, with whom he swapped jobs in the recent reshuffle, but said he will bring his “own style” to the Finance role.

However, Mr McGrath distanced himself from Mr Donohoe’s proposal that the Coalition parties enter the next government as a combined force.

Mr McGrath said he is “not a great believer in transfer pacts” but did say he thought the voters will transfer between each party if they are seen to have done a good job.


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