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More flexibility in State pension would help workers and employers

07/04/2023 Posted by IAPF | Comments(0)

More flexibility around retirement and the State pension would benefit workers and employers, said the chief executive of the Irish Association of Pension Funds (IAPF), Jerry Moriarty.

In Ireland, there is no statutory retirement age at which an employee must retire, with some exceptions in the public sector. Confusion often arises between the concept of statutory retirement ages and the age at which an individual can claim the State pension.

Legally, there is no mandatory retirement age in Ireland, Moriarty said. “As a result of an EU Directive, an employee can only be forced to retire if there is ‘objective justification’. Reaching a certain age is not, on its own, objective justification.”

Moriarty said that more employees are taking and winning cases where employers cannot demonstrate sufficient justification. “However, most people assume they have to retire at the age specified in their contract and work on that basis. And, indeed, most are happy to do so.”

Ireland will soon be brimming with fit and healthy sexagenarians, septuagenarians, octogenarians. People are living longer, and the proportion of older workers is increasing. This means that employers will need to improve how they attract, manage and develop people as they age.

Moriarty said that Ireland does need to rethink the concept of retirement. “More people are healthier and well able to do their jobs past traditional retirement age. We need to have more flexibility that facilitates those that wish to work longer.

“Many people would be happy to phase into retirement, but our labour, tax and pension laws envisage finishing everything on one day. We should allow people to work part-time and also take some of their pension.”

The government has plans to introduce five new rates of pension payments based on when an employee retires, which would see rates rise incrementally by 5% for every year a person remains in work. Those who finish work at 66 would continue to be entitled to the current weekly rate but anyone who remains in work longer will get a higher payment. The move is aimed at ending the political stalemate over increasing the pension age.

“The government has said that it will pass legislation that will allow people who wish to work longer to have the right to do so,” said Moriarty. “They would also have the option to defer their State pension and be paid a higher pension later. This would be a helpful first step.”

As well as wanting to work longer, many people may need to work longer if they have insufficient retirement savings said Moriarty. “In the future, people are likely to have mortgages that still need to be paid or require more income to pay rent.

“On the other hand, there will be many people who either do not wish to keep working or are no longer able to. This will be particularly true of people who work in physically demanding jobs or entered the workforce when they were very young.”

Moriarty said that we also need flexibility for those people, as simply raising retirement age is very unfair on them. “This could be allowing them to access their pension earlier or having a State pension that reflects the amount of time spent in the workforce.”

Some people have to retire due to health reasons and any future changes must take this cohort into consideration too. “The whole issue of retirement age is very tricky, but we do need to examine it carefully and have a system that provides the flexibility that is necessary for modern working lives,” he said.

Having older workers and age diversity in a workplace makes such a positive contribution to employers, to society and to the workers themselves. We know that it benefits employee’s mental health where an employer can ensure all their people are able to fulfil their potential.

With a third of workers in developed countries estimated to be aged over 60 by 2050, we’re really going to need the full value that they bring. The government and businesses must do more to support older people who would like to work.

Older workers are an untapped asset that should be better integrated into our economy, said chief executive, ISME, Neil McDonnell.

“Employers see older workers as an untapped asset in the labour market and would like to see them better integrated into the economy,” he said.

However, McDonnell said that one thing a mandatory retirement age meant was that there was no ‘fault’ issue at play when an older employee retired from the workforce.

“In order to protect prospective employers from potential equality claims therefore, any new dispensation around the employment of workers beyond the standard retirement age will have to make provision for no-fault termination of contracts, perhaps by way of renewal of fixed-duration contracts.

“Otherwise, we could see the WRC overwhelmed with claims for unfair dismissal,” he said.

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