National Pensions Framework - Frequently Asked Questions


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1. What is the National Pensions Framework?
2. Why was a National Pensions Framework produced?
3. What is in the National Pensions Framework?
4. What are the key statistics? (as of June 2012)


1. What is the National Pensions Framework?

The National Pensions Framework was published in March 2010. It is the result of a comprehensive public consultation process that began with the publication of a Green Paper on Pensions in October 2007. Development of the Framework was also informed by the proposals in the McCarthy Report and the Report of the Commission on Taxation.

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2. Why was a National Pensions Framework produced?

The Irish pension system is facing a number of urgent issues in relation to population changes, income adequacy in retirement and ensuring the sustainability of the Government finances.  The task of financing increasing pension spending will fall to a diminishing share of the population as demographic projections indicate that there will be less than three people of working age to every person aged 65 or over by the middle of the century, compared to almost six people today.

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3. What is in the National Pensions Framework?

The key elements of the National Pensions Framework are:

  • The State pension will be reformed and will remain as the fundamental basis of the pension system in Ireland. Every effort will be made by the State to keep the value of this pension at 35% of average earnings;
  • A new supplementary pension scheme will be introduced to provide additional retirement income for employees who are not already in a pension scheme. Employees earning above a certain income threshold will be automatically enrolled in this new scheme, and the State and employer will support this by providing matching contributions;
  • There will be matching State and employer contributions. The State contribution will equal 33% tax relief – the delivery mechanism for this to be decided;
  • The same matching State contribution (and delivery mechanism once decided) will apply to existing occupational and personal pension schemes and will replace the current system of tax relief at the standard and higher rates;
  • A new pension scheme for new entrants to the public service will be introduced;
  • The age at which people qualify for the State Pension will be increased – to 66 years of age in 2014 , 67 in 2021 and 68 in 2028;
  • A revised and more secure defined benefit (DB) model is proposed which schemes may wish to consider if restructuring in the future.   

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4. What are the key statistics? (as of June 2012)

  • There are currently 6 people of working age for every pensioner and this ratio is expected to decrease to approximately 3 to 1 by 2060.  This has significant associated pension costs for the State.
  • The number of older people is increasing – 12% of the population were over 65 in 2012 and this is expected to increase to over 23% in 2050 (numbers will more than double).
  • Life expectancy is increasing.  In the mid-1990s, life expectancy for males was 73 and for females, 78.5.  For men and women born in 2041, it will be 86.5 and 88.3 respectively. 
  • It is estimated that State expenditure on pensions (including public sector occupational pensions) will increase from approximately 7.5% of GDP in 2010 to 11.7 % in 2060.  It is important to note in this context that GDP declined significantly over the period 2008 to 2010.
  • Labour force participation rates drop dramatically at 65 years of age.  The CSO’s Quarterly National Household Survey (Q4 2010) showed that 77.2% of people aged 45-54 years were in the labour force.  This drops to 64.3% for 55-64 year olds, to 43.6% for 60-64 year olds and to just 8.7% % for people aged 65 years or older. 

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Last modified:03/07/2012
 

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