Be in control of your own retirement

On June 29, 2011, the Social Welfare and Pensions Act became law in Ireland. In that Act, the State pension age was gradually increased, starting in January 2014 by increasing the State pension age for those born between 1 January 1949 and 31 December 1954 to age 66. For those born between 1 January 1955 and 31 December 1960, it is 67. With a general election in just over 2 weeks time, the 65 year olds are kicking up a fuss.

What is the problem?

In some occupations, employers are saying that you have to retire at age 65, meaning employees are suddenly out of work and no longer have an income. They have to apply for Jobseekers Benefit instead, which pays €205 a week instead of €248 under the State pension.

For those aged 62 or older, you do not have to make yourself available for work to claim Jobseekers Allowance. It is also paid for 12 months, not the 9 months for those under age 62. Those born between 1949 and 1954 claimed this benefit for a year and then received the State pension. For those born in 1955, there is now a year gap of no income.

Aren’t the Public Service treated more favourably?

Members of the public service can receive a transitional pension. This goes back to 1995 when public servants started paying Class A PRSI which qualifies them for the State pension. Prior to that they paid Class D PRSI which did not qualify for the State pension.

For those paying Class A PRSI, their pension at retirement was up to 50% of final salary less the State pension they were to receive. Their Class D colleagues received up to 50% final salary as a pension. If they both retired at age 65, the Class D public servant would receive a higher pension than their Class A colleague in the first year, so they created the transitional pension which was payable until they reached State pension age.

  • Salary: €50,000
  • Pension (40 years service): €25,000
  • State pension at 66: €12,900
  • Transitional Pension: €12,100

The transitional pension is not payable if the public servant is in receipt of any earned income during that time.

The media and private sector workers are complaining that the public servants are getting favourable treatment over private sector workers. Firstly, public servants contribute to pension plans from day 1 of their employment. Just 35% of private sector workers do. You cannot claim you want to have the same benefits if you won’t contribute to it.

If a private sector worker, starting on €20,000 a year, contributed 6.5% of their salary to a pension for 40 years, they would have €322,621 at the end. That’s assuming fund growth of 6% per annum and a pay rise of 3% each year.

Second, this transitional pension was negotiated by trade unions at the time of the change. Trade unions numbers have dropped dramatically in the private sector over the decades…

Personal Responsibility

While the increasing pension age has become an election issues there has been an incredible lack of personal responsibility from the conversation. The changes in retirement age were made 8.5 years ago but people decided to do nothing about it until now?!!

If over those 8.5 years, you had saved €30 a week and earned a return of 3% per annum, you would have enough to bridge the income gap between receiving Jobseekers at age 65 and receiving the State pension at 67. Another option was talking to your employer and getting them to let you work beyond age 65.

I wrote about this previously that if you are going to rely on the State to provide you with an income in retirement, they decide when you retire and how much you receive. With plans to extend the payment age of the State pension further as we all live longer, this problem is not going to go away. We need to take control of our own futures. Those with decent private pensions will be retiring in their early 60’s while others will be working to age 70. But those retiring early put money away every month for their working lifetime to be in a position where they could retire when they wanted and didn’t have to rely on the State.

As always, if you have any questions, drop me an email at