The Government plans to keep the state pension age at 66 – but people who continue working beyond this will get a ‘bonus’ for each year they stay in employment.
The radical shake-up of the pension system, which was agreed in principle by the Government last week, will see entitlements continue to build until the age of 70.
There will be increases in PRSI contributions into the future to pay for the overhaul of the pension scheme.
The current state pension is €253.30 per week for someone retiring at 66, however this new plan would see workers get a higher rate for each year they delay retiring.
It has yet to be decided what the higher rates or PRSI contributions will be.
The plan was drafted by Social Protection Minister Heather Humphreys and officials in her department are working on the new system, which is due to be announced later this year.
However, all three coalition parties have signed up to the arrangement, which will financially reward those who choose to retire later in life.
The new plan was informed by the Pension Commission but does not directly follow the report’s recommendations which suggested gradually increasing the pension age to 67 over the coming years.
The move will be seen as a political compromise between Fianna Fáil, which insisted the state pension age should remain at 66 in the last general election, and Fine Gael, which has campaigned to increase it to 67 to address the threat of the rising pension bill on the national finances.
Fresh details of the pension shake-up come as Taoiseach Micheál Martin confirmed for the first time that the age for the weekly welfare payment will remain at 66. “We had a meeting on this, the three party leaders, with the Ministers for Social Protection, Public Expenditure and Health, and broad agreement has been reached,” Mr Martin said.
Speaking at a press briefing in Japan, the Taoiseach said people will still be entitled to a pension at 66 but will be given “flexibilities and options” to retire in their older years if the choose to do so.
He said people’s pension contributions will be considered when payments are being made.
“Basically, the world is changing. People are working longer in their lives. The new system has to reflect that,” he said.
The Taoiseach revealed work is also under way on introducing a ban on mandatory retirement ages.
Mr Martin said “rigid” contractual retirement ages do not reflect the changing face of the modern workforce.
“People have entitlements, employment contracts private sector employers will enter into employees but this idea of retiring at 66 has to go,” he said. “I think the market will dictate this but equally we want to make sure there’s no discrimination against people as they age because people are living longer, they’re healthier, quality of life is improving.”
Mr Martin said the retirement age will also depend on a person’s profession and the type of work they are doing.
“Not everybody (can work beyond 66), for example, certain employments can’t keep going to 70 because the work is just too difficult or too burdensome but there may be other ways of organising workplaces to facilitate people continuing on and using the expertise in a different way,” he said.