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State Pension

Pension 04.07.17It’s MMPI’s experience that the very mention of the “p” word elicits a mixture of emotions ranging from boredom/weariness through to confusion/puzzlement and all points in between. Actually pensions are quite simple to understand – they are long-term savings plans that provide income after one retires from active employment. But because of a host of legacy issues there are numerous confounding variables as to how pensions actually work in practice.

The State Pension is but one such baffling variable. On the one hand it is available to all qualifying citizens and is not means-tested. On the other hand there are some onerous qualifying restrictions. If one has worked continuously in this country for many years and made regular PRSI contributions then there will be no barrier to receiving the maximum weekly pension, which is currently €238.30 per week. But otherwise certain restrictions will apply and one will be entitled either to a lower figure on a sliding scale (usually measured against the level of one’s PRSI contributions over the years) or nothing at all.

This can be particularly restrictive on ladies of a certain age who gave up work on marriage; and others who traditionally took time out to “look after the home” and didn’t maintain PRSI payments.

For many years the State Pension was payable at age 65 – today it’s set at 68 for anybody born after 1960. MMPI has no doubt that this age level will increase further for two very specific reasons. Retirees are living longer implying that the State Pension will be a far greater future burden on the Exchequer. But, also, people are working for longer and on that basis they should not be entitled to a State Pension, which after all is intended for those who are no longer actively working!

Despite significant electoral difficulties – the so-called “grumpy grey vote” – major pension reform is an urgent priority for any elected government. The demographics suggest that the State will simply not be able to afford future pension commitments. Expect to see the entitlement age increase in the coming years to 70. For those born after 2000, the age level will be over 80 in their lifetime. In addition, the State Pension will become means tested and will not be payable, in the first instance, to those who fail the wealth-threshold test. Expect this barrier to fall significantly over time. The means test is also likely to become an annual assessment meaning that those who previously qualified for the pension may lose out in the future under new criteria.

The longevity of citizens and the government’s inability to care for them are common factors in all western societies. These issues are not improving. There is some hope that technological and medical advances will mean that old age will become more productive; and that most degenerative illnesses will be better controlled. MMPI has found that talk of longer life expectancy generates the same emotional responses as talk of pensions. For those who dare; check out http://www.100yearlife.com/the-challenge/

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