Mr. Sebastian Barnes:

The Pensions Commission did much good work. We also produced our long-term sustainability report two years ago. An important message from that report is that tackling these problems earlier makes it less expensive and gives a better range of choices than tackling them later. That is a case for addressing these issues in a timely way and that is why we highlighted the fact there is as yet no response to the Pensions Commission's proposals. It is ultimately a political choice. There are a number of options: raise the pension age, raise contributions or lower benefits. Those are political choices and I am not taking a view between them. Probably, given the size of the challenge, you need to do a combination of those things. The Pensions Commission recommended eventually linking the retirement age to life expectancy, which would help to reduce costs, and fairly significant increases in PRSI contributions. The Government has to decide which of those channels it will take.

There are two driving factors which are important. One is the population. People are living longer. Life expectancy aged 65 is increasing quite a bit. The time people can expect to spend in retirement is going up and we are having a more generous pension system. That would stop if we started to index it as the Pensions Commission suggests, but we are making the pension system more generous as we go. The other factor, which is less well understood, is that the number of people reaching retirement age will increase by 50% between now and 2050. These big baby boom-type generations are reaching retirement. That is where most of the cost increase is coming from. That is why we probably need a combination of the two. In the Pensions Commission proposals, the life expectancy increase deals with that piece and the tax part deals with the rest. There may be a case for increasing the taxes earlier because those people are working now so the tax base is bigger than it will be in the future. Taking early action is warranted.