Mr. Michael Taft:

Increasing the pension age to 67 or 68 is the ultimate incentive to stay in work because if you do not do so and drop out, you lose your work income but cannot access your pension. That is a pretty hard incentive. It tells people to continue working because they will not get their pension. There may be better incentives. The report of the commission suggests two things. First, people who continue working can continue to accumulate contributions towards their pension record. That will be very important in the context of the total contributions approach, TCA. Second, people may defer their pension until the age of 70 and continue to work up to that age. The report does not make that as a hard proposal but refers to people's pension being compensated by 4% for each year they do not receive it. That would be a substantial financial incentive.

However, there are other incentives that go beyond legally forcing or trying to force people to work to the age of 68 or 69. An example of that comes from the OECD report on the challenges of meeting future pension costs. It points out there is a high level throughout Europe, including in Ireland, of people aged 50 to 60 who have a relatively low employment rate but, more important, suffer low pay and poor working conditions. The OECD makes the point that if people are in low-paid employment with poor working conditions and intermittent income or are underemployed at the age of 55, they are less likely to continue working to the pension age, never mind beyond it. There are arguments that there are incentives that can be put in place that would give people opportunity, such as our recommendation on mandatory contracts, and a financial and workplace incentive.

Incentives are important. The commission has suggested some such incentives. Consideration could be given to the suggestion from the OECD, which is being explored by SIPTU, that once people reach the age of 55 or 60, they can apply for reduced working hours in the workplace. If a person works 40 hours until the age of 66 and then stops working altogether, it is a bit of a cliff. Why not ease it in? That would mean people may be able to continue working. There many more soft measures for incentives, but also more socially equitable incentives.