‘Stop 67’ Campaign – Pensions the Topic that has taken centre stage in our election countdown

 

With the election at the end of the week on February the 8th, it’s interesting to see what topics came to focus, more importantly, what seems to have taken our politicians by surprise. I could be somewhat cynical and express the view that our political representatives are too far removed from understanding how important the contributory old age pension is both to people that may have a pension (private or occupational scheme) to most of us in the working population. The fact that each member of the Oireachtas will be in receipt of a DEFINED BENEFIT pension on completion of service, may have something to do with it. Terms and drawdown are even better if you have risen to ministerial positions. One could be of the view that due to these unique benefits; they are again too far away from the financial requirements of normal people in retirement.

Most commentators would agree that the state pension arrangements have traditionally been a carrot for ruling parties to increase the grey vote when needed. A poultry increase when needed can lend to regular radio and TV sound bites where governing parties can again state the obvious. ‘Didn’t we increase your pension’. To counter the continuance of this practice, Pension authorities are trying to put into statute a requirement that the State pension can only be altered by two factors: –

  1. An increase annually linked to CPI
  2. A mortality assessment every 5 to 7 years

It may be part of the pending bill in 2022, but we’ll have to wait and see.

 

Private Sector Occupational Pensions and the Old Age Contributory Pension:

The majority of occupational pension scheme will have a retirement age (NRA -normal retirement age) of 65. The current election campaign has proven hard for most politicians as the question of increasing the state pension to 67 would mean a gap in pension for most private pension employees of 2 years. This means being assessed for job seekers allowance for the 2-year gap. You may not qualify for this payment as your private pension arrangement may be deemed outside the threshold. So, should employers look at pushing out their staff occupational scheme to 66/67? In our view each scheme and group employees need to be assessed in terms of: –

  1. The age profile of the members
  2. Funding years to retirement
  3. Individual members personal situation in terms of another pension arrangement (Spouse etc)

Remember, it may suit you as a member of such a scheme, to take your pension at NRA. This will provide you with a tax-free lump sum and the ability to draw income if approve retirement funds are invested in. You can of course, negotiate to receive pension benefit and continue to work. Alternatively, you could seek to have your pension funded for a further year or 2 and draw the benefit at age 66/67. Each individual situation is different, and a cart blanche decision to extend the retirement age of a scheme (NRA) may not be as black and white as it seems. Remember, there is a difference between the normal retirement age on a pension scheme and when the contributory old age pension is likely to kick in.

Watch this space!!!!

Ronan