Thursday, 20 Feb 2020

Sean Healy: 'We have lots of problems, but upping pension age is no solution'

In the next 30 years Ireland’s population will increase by more than 1.5 million to around 6.5 million people.

By 2050, almost 1.6 million will be aged 65 or older, up from 630,000 at Census 2016. The number of those aged 80 or older is set to rise even more dramatically, increasing almost fourfold to around 550,000 by 2051.

While the working-age population will continue to increase, it will not keep pace with the growth rate of older people.

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Today there are five people employed for every person not in the labour force. This is set to fall to 2.5 in the years ahead.

These demographic changes have significant implications for policy in Ireland, and this is particularly so as Ireland has a deficit compared to many of its European peers in areas of government revenue, social infrastructure (such as social housing and rural broadband), and public service provision (such as health services and childcare).

Over the past two decades, a range of research has provided some insight into future Exchequer demands associated with pensions and healthcare.

The Department of Finance has indicated that the gross cost of public pensions will rise from 5.1pc of GDP in 2020 to 6.6pc in 2070. This includes both social protection pensions and public service pensions.

The scale of the increase in age-related expenditure as a percentage of GDP is not as dramatic as one might expect.

According to the same report, total age-related spending (for example, pensions, healthcare, long-term care, education etc) will rise from 15.0pc of GDP in 2020 to 19.3pc in 2070.

One suggestion that is constantly made in this context is that the pension age should be raised.

But this proposal fails to address the range of policy challenges this new situation presents.

It is essential that Ireland takes a comprehensive approach in addressing the challenges of a growing older population.

We need to have clarity about what older people will require in the years ahead and how we intend to pay to ensure they all have what they need to live life with dignity.

While Ireland’s economy has grown dramatically and the country now ranks among the wealthiest in the world, it still has major challenges to address – climate change; poverty and inequality; inadequate infrastructure and services; the changing world of work; the lack of real participation in decision-making; and an underlying development model that is not sustainable.

All of these challenges concern older people, as well as the working-age population.

None of these problems can be resolved in the next five years, but major progress is required on all of them during that period.

It is important to note that the apparent saving to the State of not having to pay the State pension to people for a year is not very high, about €250m, but this is reduced substantially by the fact that a large proportion of those who don’t qualify to receive the pension for a further year will be eligible to claim Jobseeker’s Allowance during that period and will do so.

If Ireland really wishes to address the challenges posed by an expanding older population, it must develop policies aimed at achieving five key outcomes: (1) a vibrant economy; (2) decent services and infrastructure; (3) just taxation; (4) real participation; and (5) sustainability.

Most people will agree with those outcomes.

But what is often missed is the need to achieve these outcomes simultaneously.

Decent services and infrastructure are essential to have a vibrant economy and just taxation is essential if the benefits are to be spread fairly and inequality is to be reduced.

Likewise, real participation in shaping the decisions that affect them is essential if people are to accept the demands that a changing situation will impose.

It is not possible to run a modern democracy without real engagement with ALL sectors in society.

If Government wishes all of society to take responsibility for producing a more viable social and economic model, it must involve all of society in shaping it and that includes older people.

When groups have been involved in shaping decisions, they are far more likely to take responsibility for implementing these decisions, difficult and demanding though they may be.

The pension age should not be unilaterally increased by Government.

Many people may be glad to stay in their job after the age of 65 and that option should be available and facilitated.

However, many may also want to retire at that age.

That may especially be the case for people who have worked in physically demanding jobs or whose health status may not be as good as in their younger days.

All should have access to their pension and should not have to face any delays or postponements.

Despite doing very well economically, Ireland faces many challenges. But there are solutions available.

Increasing the pension age is not one of these solutions.

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