Mr. Sebastian Barnes:

Basically, the population is ageing and people are living longer. More people are reaching pension age because of the demographic trends we have had in the past. Many people were born in the late 1970s and early 1980s. As those people reach retirement age there will be major challenges, as noted by Deputy Ryan, in terms of pension sustainability. There are several solutions. In fact, the menu is fairly well defined. One option is to find the money somewhere else in terms of general increases in taxation or reductions in spending. Within the pensions system or related to it, one option is to raise PRSI contributions. Another thing would be to adjust the level of pension benefits. Yet another option would be to raise the retirement age. A one percentage point increase in PRSI would raise approximately €750 million. If we relied on that instrument only, we would have to raise PRSI rates by a significant amount to finance the pension system or address the pensions problem in that way. We will need a broader approach. As we said in our long-term report, we believe raising the pension age gradually and partially to reflect rising life expectancy would be a natural way of adjusting for this. It could be done in such a way that people spend the same share of their lives in terms of working and retirement. The amount of time people could expect in retirement would also be increasing but it would not be increasing as fast as if we held it fixed. We believe that is an important part of any package, because that is essentially where many of the pressures are coming from.

Tackling that pressure at source is probably a key part of pensions sustainability. We will see what the Commission on Pensions comes up with. I am sure it will consider these issues very carefully.

What is striking is life expectancy at 65. The length of time one can expect to live to the age of 65 is rising by one year every five years. If we look to our children, they will be living at least five years longer than us or less, depending on which way we are going. These are major changes. I do not think we realise that looking at it every year but life expectancy is increasing very fast. That is where many of the pressures in the public finances will come from and that would seem a key part of any package to address.