State pension age becomes a major election issue
Is this an issue that affects teachers?
The State Pension (Contributory) – previously known as the Old Age Contributory Pension – is a weekly pension payment paid by the Department of Social Protection to retired workers. The amount paid varies between €99.30 and €248.30 per week as the payment is based on the number of PRSI contributions a worker has made during his/her employment.
Previously the State Pension was paid once an employee reached age 65, but the qualifying age was increased to 66 in 2014. The qualifying age is set to increase to age 67 in 2021 and to age 68 in 2028.
Most retired teachers paid Class D PRSI during their teaching careers. Class D is a lower rate of contribution that does not cover entitlement to the State Pension. These teachers have their pensions paid in full by the DES.
However, since 6 April 1995 all new recruits to the public sector – including teachers – pay Class A PRSI. Class A contributors are eligible for the State Pension. Teachers in this category will have a ‘coordinated pension’ i.e. they will receive a (smaller) pension from the DES and the State Pension.
Over the next 10 to 15 years coordinated pensions will become the norm for all public service retirees and all teachers will have a very keen interest in the commencement age of the State Pension.
The workers most concerned by the proposed increase of the commencement age to 67 (and subsequently to age 68 in 2028) are those who have contracts that require them to leave employment at age 65. These retirees at present have to suffer an income gap, or more likely, have to sign up for Jobseeker’s Benefit – which is very unpalatable to those who have spent a lifetime in the workforce! The problem is particularly acute for those workers who have no occupational pension and rely solely on the State Pension in their retirement. It is estimated that up to 40% of workers are in this position.
At present some teachers (currently a minority, see note below) who have a coordinated pension have a safety net if they retire before age 66. The DES will pay a ‘supplementary pension’ or pension top-up in the interval between retirement from teaching and the commencement of the State Pension at age 66.
What is the response of the political parties?
As the raising of the pension year to 67 next year has unexpectedly emerged as an election issue some parties are scrambling to explain their position and have promised to clarify their stance when election manifestos are published later in the campaign.
However, the early responses include:
- proceed with the increase to age 67 but put a transition payment in place for those workers who are contractually obliged to retire at 65; (Fine Gael)
- defer the increase to 67 and put a transition payment in place pending the outcome of a comprehensive policy review. Outlaw contracts that force people to retire before reaching State Pension age; (Fianna Fáil)
- maintain age 66 as the State Pension age; (Labour and Social Democrats)
- restore the State Pension age to 65; (Sinn Féin and People Before Profit)
Further details will be posted as the debate progresses and the parties clarify their positions.
Note: The change to Class A PRSI was introduced for new recruits to the public service on 6 April 1995. However, the new rules also applied to any person who returned to the public service after that date. Some teachers who started their careers as Class D contributors – left teaching and returned after 6 April 1995 – became Class A contributors on resumption. The State Pension is an element of this cohort’s retirement income.
Accordingly, while it will be some years before ‘coordinated pensions’ become the norm for every public service retiree, coordination is already a reality for an increasing number of teacher retirees.
Approved leave – either paid or unpaid – does not constitute a break in service and therefore does not change a person’s PRSI category.