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Government may let people defer State pension to qualify for higher benefits

Future Government incentives for those who want to work beyond the traditional retirement age could include permitting people to defer their State pension and receive higher benefits when they actually do finish working. Tim Duggan, assistant secretary at the Department of Social Protection, said on Tuesday one option would be to offer an actuarially-enhanced pension to those who decide to put off receiving their State pension when they reach the qualifying age and continue working for a further period. 

Speaking at a Workplace Relations Commission seminar in Dublin, he said another option that could be examined was to allow those who did not have an entitlement for a full pension to work longer and continue to make social insurance contributions. This would permit them to receive higher pension benefits when they did eventually retire. Mr Duggan said that demographic pressures meant the country was facing into stormy weather in relation to pension provision and that changes would have to be made if there was to be a sustainable system in the future. 

He said the social insurance fund from which the State pension is funded would go into a small deficit by about 2020. However, he said that a decade later this deficit could reach €3 billion. The system in place over recent decades to encourage people to take out their own private supplemental pension cover had not worked, he added.


He said only 35 per cent of people in the private sector were paying into a supplementary pension system despite the tax incentives provided and possibly only 20 - 25 per cent were making regular contributions. This could lead to “massive coverage issues and massive [income] adequacy issues” in the years ahead. Mr Duggan said the Government had signalled its intention to move towards an auto-enrolment pension scheme but that people would be allowed to opt out and to re-enrol again in the scheme at a later date. It is vitally important in an economy of the size of Ireland that we achieve economies of scale. He said while there was a general consensus that auto-enrolment was the way to go, there was no consensus on how it should be done and by whom. While in Sweden it took six years from first announcement to put such an auto-enrolment scheme in place and in the UK it took 10 years, in Ireland the plan was to do it in four years, he said.

Having consensus was going to be really important as such pensions reforms were not just a “one government event”. Mr Duggan said such a scheme would operate over multiple terms of the Oireachtas and it would “fail miserably if it was chopped and changed” every time there was a change in administration. “It is vitally important in an economy of the size of Ireland that we achieve economies of scale. Things like this only work if we can absolutely minimise cost and absolutely maximise benefits.”