Retirement age: The new stealth tax

A bill is at present going through Dáil Éireann that would allow the Minister for Public Expenditure and Reform to increase the retirement age for public servants to 70 years of age. The bill will allow a future minister the option of increasing the compulsory retirement age to 75. This is a totally regressive move but it is passing through the Dáil with little or no resistance from trade unions or anyone else. For over a decade the neo-liberals have been attacking public pensions and by constant repetition of phrases like “the pension time bomb” and claims that public pension provision is unsustainable they have dominated the debate in this area and peddled myths about pensions in order to pursue the agenda of individual pensions and the enrichment of the private pension industry. Previous editions of Socialist Voice have exposed the myth of the ‘Pension Time-Bomb’. This article will look specifically at the retirement age.

Pensions were first organised in the eighteenth century in the Royal Navy. They were subsequently extended in the nineteenth century to the working class. In the late nineteenth century firms offered pension schemes to employees, especially skilled workers, in order to retain them. In the early twentieth century David Lloyd George introduced old age pensions in 1908. If you were 70 on the 1st January 1909 you could claim an old age pension. In Ireland because of the non-registration of Catholic births before 1865 you were deemed to be 70 years or older if you could remember The Great Wind (6th January 1839). An unexpectedly high number of Irish people showed how good their memories were and remembered the storm. In effect Lloyd George’s scheme and private pension schemes introduced two important concepts: a retirement age of 70 and the idea of retirement where you could live for a few years with an income but not working. Pensions are deferred wages and the state pension was designed to relief poverty. In 1911 life expectancy for a male was around the mid 50’s.

Over the next century due to pressure from unions among other factors the pension age was brought down from 70 to 65. At the same time the average life expectancy increased to 78 by 2014. There was also a fall in infant mortality in the same period. Private occupational pension schemes tended to mirror the retirement age of the state pension. So 65 became the normal retirement age. You could retire earlier if you had the money or continue working after 65 if you could find a job and wanted to stay working. During the financial crisis the state retirement pension was moved out to 66 and from 2021 it will go to 67, 68 from 2028. Although the current bill claims working to 70 will be voluntary it is clear there is an intention to push the pension age to 70 and possibly 75. John Martin, who was involved in an OECD report on pensions in Ireland wants the pension age linked to life expectancy. In other words, regardless of how much and over what period of time you pay PRSI if you are healthy you just have to keep working as long as these 21st century slave bosses determine. At 66 Ireland has the highest retirement age in Europe. All the former Soviet block countries (except Poland) have retirement ages lower than 65.

The public service defined benefit scheme has been effectively closed off for new entrants. Defined contribution schemes are the only option for workers. These are expensive and deliver vast profits to the pension companies. Effectively, paying into a private sector scheme is not a very good investment with your wages and is highly risky. By pushing the qualifying age higher the government is both forcing workers to use private schemes and is extending the period of taxation. If you started work at 20 and worked continuously until 66 that would be 46 years. Pushing the qualifying age higher will extend that contribution period. Due to reforms made by Joan Burton in 2012 it will be more difficult for more people to qualify for a full state pension. Regina Doherty in the Irish Times (Saturday 21st July) revealed Government thinking in this area: she wants to encourage older people to stay in work as it would be easier than trying to “source workers in a period of full employment”. She is quoted as saying:“Rather than look to immigration, [we should] look at the potential work force. we have here”. She also said “we’re not looking for people to come to Ireland where we don’t necessarily have the housing or the road infrastructure for more people travelling to work”.

These changes need to be resisted.