Ireland’s national finances will become unsustainable within decades without ongoing increases to the pension age.

In its first-ever “Long-Term Sustainability Report,” the Irish Fiscal Advisory Council warns that increasing life expectancy will have “major implications” for the country’s finances in the coming years.

It said “prompt and early action” is needed to ensure people who are working and having children at the moment are not left to pick up the tab.

   

On Newstalk Breakfast this morning, IFAC Acting Chairperson Sebastian Barnes said the country will be facing into some “really big long-term challenges” as soon as the COVID crisis is over.

“It is basically to do with lower growth; it is to do with ongoing health challenges – but it is really mostly to do with population ageing,” he said.

“We are going to go from a situation today where there is one-in-six of the population under the age of 65 to a position within a generation where it is going to be one-in-four.

“That is obviously going to create huge pressures on pension spending and on healthcare spending.”

"Unsustainable"

The IFAC report warns that Government spending will outstrip revenues by 2025 without significant policy change.

It said that will Ireland’s debt to income ratio falling to around 90% by 2040 before rising substantially to around 110% by 2050.

Mr Barnes said life expectancy will increase from 85 to 90 in the coming years and warned that a failure to increase the pension age in line with the “just doesn’t add up.”

“If we kept the pension age as it is, people will be in retirement much longer and that would be much more expensive,” he said.

“And if we don’t also adjust a number of other policies basically what is going to happen is the public debt, which would otherwise fall in the coming years will stay at a very high level.

“Then it will increase in a way that is ultimately unsustainable so at some point, sooner or later these issues are going to have to faced up to.”

Pension age

Mr Barnes said there is already legislation in place to increase the pension age in 2021 and 2028 and insisted it is “very important” the plans are followed through on.

“If the pension age is increased as planned and other changes are made earlier with a slightly more prudent fiscal policy and debt kept a little bit lower than it might be otherwise, that will ultimately be less costly in terms of the adjustment that is required,” he said.

“It will also avoid shifting the burden onto future generations. When I say future generations, I don’t mean people decades away, I mean people like me, who are working age with children because by the time we retire these issues will really be kicking in.”

You can listen back to the interview here: