BY JOHN ELLIS, FINANCIAL ADVISOR
In a recent landmark announcement, the Government has revealed a series of significant changes to the State Pension (Contributory), promising flexibility and improved benefits for those aged 66 and above. The most striking development is the decision to maintain the State Pension Age at 66, contrary to recommendations from the Pensions Commission advocating for an increase to an older age. Their recommendation was a gradual incremental increase in the State Pension age by three months each year commencing in 2028, reaching 67 in 2031 (10 years from now), with further increases of three months every second year reaching 68 in 2039.
To address concerns about the retention of the 66-qualifying age, the Government plans to transition from the current ‘Yearly Average Method’ to the ‘Total Contributions Approach’ over a phased 10-year period. This, they say, will make the system fairer and more equitable for all contributors, streamlining pension calculations, ensuring a fair and consistent approach for all pensioners.
Another change is the introduction of a flexible retirement system starting this month. Individuals will have the choice to continue working until age 70 in exchange for a higher State pension. This move aims to allow workers to make decisions in line with their personal circumstances and financial goals.
To assist pensioners in making informed decisions, the government will encourage individuals to request a copy of their contribution statement on MyWelfare.ie. This summary of pay-related social insurance (PRSI) contributions will also serve as a valuable tool for estimating State pension (contributory) rates.
Therefore, workers will now have access to a PRSI contribution statement annually designed to facilitate a better understanding of entitlements and contributions. It will include those who have worked or lived in other countries, such as the UK who may still qualify for the Irish contributory State pension.
At long last long-term carers are being recognised within the pension system for years of selfless and unpaid service for loved ones This move represents a crucial step toward valuing unpaid caregiving work and ensuring financial security for those who have sacrificed their careers for the well-being of others.
To fund these changes the State pension system will be paid for by incremental increases in social insurance rates. To ensure transparency and fairness, the level and rate of these increases will be determined through a structured process every five years “by statutory actuarial reviews”.
The application process for the State pension (contributory) has been streamlined also, allowing individuals to apply three months before turning 66. But should you have contributions in multiple countries you are advised to apply six months before reaching the qualifying age.
These reforms do represent a significant step forward for Irish pensioners. The Government is committed to a more flexible system including the recognition of “caregiving contributions”, and a more sustainable approach to pension provision which should have a positive effect with families across the nation.
Now is the time to get your pension in order. Use all available information and services to stay informed to plan for a secure and fulfilling retirement. Start with the Government website – www.gov.ie.
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