The government should abandon its commitment to keep the state retirement age at 66 and continuously adjust the retirement threshold to life expectancy to keep debt under control, the Organization for Economic Co-operation and Development (OECD) said.
In a rebuke to controversial reforms the government agreed to in September, the intergovernmental organization recommended that Ireland reintroduce plans to raise the retirement age to 68 by 2028.
The OECD’s annual economic survey of Ireland also proposed an automatic link between retirement age and life expectancy, which would reduce pension spending by 1 per cent of GDP in the long run.
Otherwise, Ireland could cost Ireland €13 billion in additional costs per year by 2050 by 2050, according to the report the country’s fiscal health at risk.
“We are clearly among those who believe that aging will have a lot more costs in terms of pensions, long-term care and healthcare,” said Vincent Koen, head of country studies at the OECD, at the launch of the Ireland 2022 survey at the Institute for International and European Affairs (IIEA) in Dublin.
“We have run simulations where it appears that Ireland faces additional spending of 6 per cent of GDP linked to these demographic factors in the future.”
OECD models in the survey forecast debt three times higher by mid-century if Ireland sticks to a retirement age of 66 rather than implement reforms recommended by the Pensions Commission.
Outgoing finance minister Paschal Donohoe said the government would not revisit the retirement age issue in light of the OECD’s recommendations, instead pursuing other reforms of the pension system.
“The government has already made the decision on the retirement age, and what we need to do and what we are committed to is to find alternative ways to address the sustainability of our pension system and public finances,” he said afterwards IIEA event.
“So the next step for us in this regard is to make a decision on the right level of PRSI in our tax law and in our economy, and we believe this is a different and effective way to address the sustainability of our pension system .”
The survey was otherwise full of praise for the government’s handling of fiscal challenges in recent years, including the Covid response and inflation support for households and businesses.
However, she warned that measures to contain inflation must balance short-term urgency against potential long-term damage from unplanned permanent spending increases.
The OECD also warned that mortgage arrears were still a “significant problem” for Irish banks and the economy at large.
The Paris-based group advised the government to consider using UK-style “possession orders” to help asset recovery and boost repayments.
This would allow lenders to seize property but allow defaulting borrowers to remain in their homes. subject to compliance with the terms of payment.
In a survey of Ireland’s economy released yesterday, the OECD has also warned of housing, health, pension and climate costs which it says could push up debt levels in the future.
“The economy has weathered the Covid-19 pandemic and is coping well with the impact of Russia’s war of aggression against Ukraine,” the survey said.
“However, fiscal policy faces a number of pressures in the short term and in relation to its longer-term sustainability.”
The OECD previously predicted the Irish economy to slow to 0.9 p c growth next year as rising prices hit household incomes.
It comes after brisk modified domestic demand growth of 8 percent this year, a measure of that strikes out the multinational sector.
Inflation is expected to average 8.4 percent this year and remain high at 7.2 percent next year before slowing to 2.9 percent in 2024, the OECD said. Core inflation – excluding volatile food and energy prices – will remain close to 5 percent through 2023.
Gross domestic product — which includes the multinational sector — is expected to grow 10.1 percent, faster-than-expected, the Paris-based OECD said in November, more than double the previous rate, but it will fall back to 3.8 percent next year.
The 2022 figure is well ahead of Irish and recent EU forecasts for the year and places Ireland at the top of the 38-member OECD rankings in 2022.
In 2024, modified domestic demand is expected to recover to 3.1 percent, similarly
to the broader GDP forecast of 3.3 percent.
Ireland’s GDP growth is ahead of the global economy, which is set to slow to 3.1 per cent this year and 2.2 per cent next year, and recover slightly to 2.7 per cent in 2024 – well below pre-war forecasts.
https://www.independent.ie/business/personal-finance/pensions/raise-the-pension-age-to-68-or-face-13bn-hole-in-old-age-costs-every-year-oecd-tells-government-42220586.html Raise the retirement age in Ireland to 68 or face a €13 billion hole in old-age costs every year, the OECD tells the government