Social Protection Minister Deputy Dara Calleary has been warned that further hikes to the social insurance fund (PRSI) will be needed to prop up the State pension, with the number of those aged 65 and over rising.
As Ireland grapples with an ageing population, the number of workers to support those reaching retirement age is declining. According to the Department of Health, the number of people aged 65 is projected to reach more than one million by 2030, and up to 1.94 million by 2057. Meanwhile, CSO figures show that fertility and birth rates continue to decline.
The Irish Independent reports that Minister Calleary has been told that the sustainability of the pension system must be to be a top priority. It reports on a briefing document in which department officials highlight how the State pension gap was already being addressed through a number of measures including a gradual hike in PRSI contribution rates for workers, employers and the self-employed worth 0.7 percentage points over five years.
According to the document, a roadmap for changes in PRSI was the primary revenue-raising measure to address shortfalls in social insurance income in the coming years, and an alternative to raising the state pension age.
“Sustainability of the pension system will remain an issue, with the need to review contribution rates following completion of the next Statutory Review of the Social Insurance Fund in 2027,” it said.
The document also noted that there had been an initial increase in all PRSI rates of 0.1 percentage points from 1 October 2024.
The next actuarial review for this year is set to be completed in 2027, according to the document. It also noted that Irish fertility rates are “currently below the replacement rate in most developed countries, including Ireland.”
“It is vital to ensure a sustainable financing model so that the current workers, who fund current state pension payments through their PRSI, can expect to receive an adequate pension themselves when they reach retirement age (the equity objective),” it added, The Independent reports.
The document also warned that in order to maintain the current dependency ratio of pensioners to workers in 2051, a working age population of almost 7.2 million people would be needed by 2051 – 3.3 million more than the CSO has projected.
In addition to worsening the public finances, an ageing population also poses the risk of slowing the economy’s growth rate, as labour supply falls.
A 2024 survey found one in five Irish adults have no financial arrangements in place for retirement.
The findings from the Competition and Consumer Protection Commission (CCPC) show the figure increases to 28% for those aged over-55. Affordability was a key reason for this (30%) as well as “not getting around to it” (25%).
Six in 10 Irish adults have a pension in place, while over half said they plan to use savings to fund or partially fund their later years.