Denis Naughten (Roscommon-Galway, Independent) | Oireachtas source

It has been positive to see the joint Oireachtas committee report on pensions has created debate around the retirement age and broader issues related to pensions and the funding of them into the future. A key issue for the committee in overcoming our pension challenge over the next 50 years is the introduction of legislation banning mandatory retirement in employment contracts to apply to new contracts and, retrospectively, to current work contracts. It would give people the option to go beyond their present retirement age, if they so wish. It is the view of the committee members that it would be wrong to force people to retire at 65 and have them wait until 68 to access their pension. While some preliminary figures were available to the committee on the potential costings of providing a social welfare payment to people between their 65th birthday and accessing the State pension at 68, these could not be robustly extrapolated into costs for the State for such replacement supports.

The bigger issue is if we remove the requirement to retire at 65, many workers will continue to remain in employment.

This is not just because of the changing nature of work, especially here in Ireland, where we are moving from more manual employment to technological and even remote-based work, which allows people to continue to work longer, but also because some of the financial realities of living in Ireland today mean that people will have to work longer to be financially secure in their retirement. According to the Banking and Payments Federation Ireland, the average borrower age is now 40, with an average loan term of 22 years. The Central Bank of Ireland has highlighted in a report on household lending that almost 50% of new first-time buyer loans in the first half of 2018 had a loan term of between 30 and 34 years. These facts mean that people have little time left after clearing their mortgages to build up personal savings before they retire.

Furthermore, many more people are starting their first full-time jobs well into their 20s, which will leave them short on receiving a full contributory State pension by their 65th birthday. The committee considered a technical paper produced by the Commission on Pensions. It pointed out that "While increasing the State pension age has the greatest impact on reducing [pension] expenditure, a substantial increase in the employment rate of older workers, of 10 percentage points by 2070, would [...] reduce future expenditure". The paper points out the small difference between increasing the pension age to 68 compared with increasing the employment rate of older workers by 10 percentage points over the next 50 years. In fact, this small difference has already been addressed by the higher participation rates we have seen due to remote working during Covid-19. Surely if as much effort was put into removing the barriers to facilitating older people working longer as has been put into pushing up the retirement age, it would be within our capacity to increase the number of older people working by an average of 0.2 percentage points a year over the next 50 years.

An argument has been made that if we were to allow people to work beyond their 65th birthday, the result would be to close off promotion opportunities for younger staff in organisations. The Civil Service has overcome this challenge for senior positions by filling such posts on a seven-year basis, thus allowing new thinking and younger people to compete for such roles. There is no reason the private sector could not take a leaf out of the public sector book for a change.

The Social Insurance Fund was in surplus to the tune of some €4 billion at the end of 2019. It has gone into deficit, as we know, in the last couple of years due to payments for the Covid-19 pandemic. The Commission on Pensions, in its recommendations, stated that the pension element of the Social Insurance Fund should be put into a separate fund. These funds should be invested just like private pension funds. We already made this policy decision when we established the National Pensions Reserve Fund, NPRF. Do any of the Members remember that? It was generated from the sale of Telecom Éireann and that money was invested in the financial markets through the NPRF until it was cashed in to bail out our banks. We should put the excess corporation tax receipts into this new fund to kick-start it and put Ireland on a trajectory of a sustainable roadmap for the future of our State pension.

The point the committee has made is that we have looked not just at the tightly constrained remit the Commission on Pensions was given, but also at broader issues in this area, including increasing workforce participation rates. We are saying now that workforce participation rates will not increase to any great extent over the next 50 years. In two years, we have managed to increase workplace participation rates by 3.1% as a result of the impact of Covid-19. We did so by introducing flexible working arrangements that have facilitated more women to participate in the workforce. Equally, people from rural communities have been facilitated to obtain higher paying jobs in urban areas because they can now work remotely. We have seen a phenomenal shift in two years.

The Minister of State was across the table from me when I was arguing for the benefits of promoting remote working. Sadly, that argument fell on deaf ears at the time. We had to have a pandemic to see the difference remote working can make and is making. In two years, remote working has changed the baseline on which all the projections put forward by the Commission on Pensions were based. As I have argued today, using the current baseline and supporting older people to work beyond their 65th birthday would bring in the same amount of money as increasing the pension age to 68. Surely it makes far more sense to support older people and give them the dignity of being able to continue to work, rather than forcing them into retirement at 65 to go and draw a social welfare payment. It is wrong to tell people who have worked hard all their lives that at the end of that time, they must go and draw a social welfare payment for three years until they get their pensions. There are other options. We can support and encourage those people to continue to work. Let us, for once and for all, get rid of this archaic law that prescribes that people must retire when they reach 65.

I will be told that this cannot be done because legislation cannot be applied retrospectively. Over the last decade, we have seen that this can be done. People's pensions were reduced to deal with the financial situation we experienced. We have seen examples where things were done in the last two years that we had been told were constitutionally impossible. If the willingness is there to do it, we can bring forward this legislation. This single measure will do more to address the pension deficit we will have in the next 50 years than tinkering with any retirement age.

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