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Pensions timebomb: Let's link pension age to life expectancy, says expert

People are living longer so it makes sense to increase the pension age beyond 68 – so says the man behind today’s OECD report into Ireland’s pensions.

Image: Timebomb via Shutterstock

THE AGE WHEN people receive their pension should go up as life expectancy increases in Ireland, a pensions expert has said.

John Martin, who was behind the major OECD report into Ireland’s pensions, said it is unsustainable for the government to increase the pensionable age to 68 and then not increase it any further.

Minister for Social Protection Joan Burton said while it was overall a positive thing that life expectancy is increasing in Ireland, there are also “very real and very obvious public policy challenges” arising from the change.

The government has already recognised the unsustainable nature of the current pensions system: the current pensionable age of 66 is set to rise to 67 in 2021 and then to 68 by 2028.

However, life expectancy for Irish people continues to increase due to advances in medicine and lifestyle: it is currently at 76.7 years for men and 81.6 years for women, meaning people are relying on their pension for longer.

John Martin said the size of the challenge facing Ireland is ‘not insurmountable’ if economic growth resumes in Ireland.

“If you look across all OECD countries, you see that the State pension ages are increasing,” Martin told a press conference in Dublin today.

“The modal age now is 65, it’s drifting up to 68. Ireland is [increasing this age] quicker than other countries, and I think that’s  a very admirable thing,” he said.

But you know, our view is that if life expectancy continues to increase, as we all hope it will, then the idea that you can stay at 68 for forever is unlikely to be sustainable.
And our view  is that it’s advisable to try to have some rule perhaps linking life expectancy to the State pension age, and there are different ways in which this can be done.

“I think that’s something that really warrants serious attention and discussion, looking ahead to the future,” he said.

Martin noted that the most recent figures from 2009 show that less than 50 per cent of people have private pensions, despite a previous government target to have 70 per cent of workers aged between 30 and 65 paying into a private pension.

There are currently 5.3 people working for every retired person, but it is projected that this will fall to just 2.1  in the next fifty years – meaning there will be an asymmetric burden created by the amount of money paying into pensions and the amount of people actually receiving them.

Read: OECD report recommends mandatory pensions for private workers >

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