Cabinet has signed off on plans to bring a new private pension scheme into effect that will benefit over 750,000 workers.
People can choose to participate in the scheme, which is open to all workers aged 23-60 that are not currently enrolled on an occupational pension plan. The system will allow workers to save an additional €4 for every €3 saved to an individual’s pension account.
Minister for Social Protection Heather Humphreys said that the move was a “historic milestone” in terms of retirement income. However, the increased income is only valid if a person continues working until the age of 70.
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The Minister previously stated: “Ireland will move to a new flexible pension model from 2024, similar to the systems in place in a number of European countries.”
She added: “Under this new model people will continue to be able to retire and draw their pension at 66 exactly as they can today. In addition, for the first time, people will now be given the choice to continue working beyond 66 in order to receive a higher pension payment.”
The new system will be paid for through annual increases in PRSI contributions .The tiered pension plan has been criticised by opposition figures, with Mary Lou McDonald labelling it as a “Trojan horse” that would pressurise people into working until the age of 70.
The bill will go before the Oireachtas Committee on Social Protection now it has received Cabinet approval. It is estimated that it will come into effect in the first quarter of 2024.
The pension plan has five tiers, starting at age 66 and ending at 70. People who choose to retire aged 66 will receive a flat weekly rate of €253. People who stay on will receive a higher weekly pension depending on additional years worked, with a worker who retired aged 70 eligible for €315 per week.
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