THE CURRENT PENSION age is unsustainable in the long-term, according to a report by the Irish Fiscal Advisory Council (IFAC).
This comes as high debts in public finance have built up due to the response to Covid-19. IFAC has said that both low-cost borrowing and adjustments to fiscal policies will allow debt levels to return to lower levels.
According to the report, longer-term challenges will be faced due to Ireland’s ageing population, with pension ages and higher health costs likely to drive fiscal policy and sustainability in the future.
With current policies in place, government spending is expected to surpass government revenues by 2025 with the increased costs from pensions and health costs.
Currently, Ireland’s dependency ratio in 2019 is estimated to be 21.6%, compared to the provisional EU average of 31.4%. The dependency ratio is formed by comparing the number of 16-64-year-olds to the number of people who are 65 and older.
However, Ireland’s dependency ratio is expected to rise to the EU average by the mid-2030s.
“Policy action will be required in the coming years to manage the impact of an ageing population on pensions costs and more widely to manage pensions and health pressures,” said Sebastian Barnes, the Acting Chairperson of IFAC.
Barnes also called for this action to be taken sooner rather than later, saying “as life expectancy increases, implementing already legislated increases in the pension age to beyond 66 will go a long way to achieving this.”
IFAC has recommended that the government consider a combination of measures, with either strengthening public finances earlier or implementing reforms suggested by IFAC.
According to the report, there are also risks associated with climate change, with some revenue generators, like carbon tax and motor tax, potentially impacted as Irish society adapts to more climate change mitigation policies.
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