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oap nightmare People aged over 66 face having to pay PRSI for the first time under controversial proposal

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Social Protection Minister Heather Humphreys outlined the Commission's view that the current state pension system is not sustainable. Photo: Gareth Chaney/Collins

Social Protection Minister Heather Humphreys outlined the Commission's view that the current state pension system is not sustainable. Photo: Gareth Chaney/Collins

Social Protection Minister Heather Humphreys outlined the Commission's view that the current state pension system is not sustainable. Photo: Gareth Chaney/Collins

More than 350,000 pensioners could be hit with PRSI for the first time under controversial new proposals.

The Pensions Commission wants to remove a special exemption that allows people aged over 66 to avoid Pay Related Social Insurance (PRSI) on their non-state income.

Future governments face a challenge to maintain funding for the state pension and the commission believes older people should contribute as an act of solidarity.

The charge would be set at a rate of 4pc on all weekly income over €100, except for social welfare payments such as the state pension. It would apply to private or public sector pensions, and income from a salary for a person over 66 who is still working.

Anyone getting income from savings, dividends, investment returns, or rental income who is 66 or older would also have to pay PRSI for the first time.

The Pensions Commission recommends significant changes, including linking rises to inflation and offering greater flexibility around when people can start accessing payments. One idea is to allow those who started working early in their lives to have the option of retiring at age 65, which is one year earlier than the current state pension age of 66.

And those who want to keep working should be able continue to build up pension credits up to age 70, it recommends.

As previously revealed by the Irish Independent, the key recommendation is that the state pension age will not reach 67 until 2031.

This delay in raising the state pension age would be funded by higher PRSI payments. It says self-employed people should see their contributions rise from 4pc to 11pc in the coming years.

The report also recommends that pension provision for long-term carers be enhanced.

Years spent out of the workforce when providing care will be recognised to ensure they get more PRSI credit to take them closer to a full pension.

Social Protection Minister Heather Humphreys said: “The Commission unambiguously established that the current state pension system is not sustainable into the future and that change is needed.

“In 2020, for every one person in receipt of the state pension there were 4.5 people working. By the time we reach 2050, for every person in receipt of the state pension there will be just over two people working based on current projections. We are younger than our European neighbours, but the population is healthier and we’re living longer.”

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However, a move to impose PRSI on pensioners is likely to be seen as an unjust tax on Ireland’s older people.

If implemented it would mean that retired and older public servants, who have no entitlement to the state pension, would end up paying PRSI for the first time.

Some were relying on a public sector pension that was less than the value of the state pension, unions said.

The Irish Congress of Trade Unions (Ictu) said the recommendation to end the exemption from paying PRSI “could unfairly and disproportionally effect certain groups of pensioners.”

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