Workers could face tax increases in the next budget as the government considers raising the PRSI to replenish funds to pay future pensions.
This is because the Irish Fiscal Advisory Council (IFAC), the budget watchdog, has urged the government to take action now, including raising the PRSI, to make more money for the young working-age population to fund the retired population. This was after asking to avoid having to bear the costs. come.
Social Protection Minister Heather Humphries is set to submit a proposal for a social insurance fund to the Cabinet in June, indicating that a “small and gradual increase” in the PRSI will be required.
Ms Humphreys told the Cabinet this week that the Social Security Fund is running a surplus of almost €3 billion.
Taoiseach Leo Varadkar says: IFAC argues that the sooner the government raises the PRSI, the better.
He said this is something the government should consider between now and the October budget.
“We have decided not to raise the pensionable age, so we need to raise the PRSI, but the government will make a decision before the budget as to whether it needs to start with this budget or whether it can start in 2015. Future budget,” Varadkar said.
Taoiseach said the social insurance fund is likely to remain in the black for at least another decade.
There are about 4 working age population for every retiree in the state.
But by 2050, there will be just under two working-age people for every retiree.
Under the current PRSI model, far fewer workers pay into the pension plan through contributions than retirees receive pensions.
IFAC President Sebastian Barnes said raising contributions to PRSI to the current flat rate would increase contributions by about 3%.
He said the current pension system will come under a lot of pressure as the population ages and now is the time to improve the system for future generations.
Humphreys said the pensionable age will remain 66 and will again take a flexible approach that allows workers to work longer to receive more pensions or to cover outstanding PRSI payments. confirmed.
In response to IFAC’s recommendations, Humphries said there is a need to be aware of what is happening across the economy and “pay attention” to the cost of living crisis facing households.
“I submitted a report to the Cabinet this week showing that the Social Security Fund is actually in the black of almost €3 billion. because people are contributing to the social insurance fund.”
She has always said long-term, “This is a problem we have to deal with,” but added, “What we need is a small incremental increase in PRSI.”
IFAC also proposed setting aside a portion of contingent income from corporate taxes that could lower the overall cost of pensions.
Treasurer Michael McGrath said he would set up a separate fund that would be set aside to pay future pensions.
“Since becoming Finance Minister, I have worked with public officials to develop proposals for a long-term fund that will support fiscal resilience for the future.
“We are particularly conscious of the need to capitalize on the unexpected corporate tax receipts, and I believe this requires new structures to be put in place.”
He said the State Reserve Fund, currently holding €6 billion, served a “useful purpose in the short term” but needed a new fund to meet the costs of an aging population and other future pressures. I think that it is
“In the coming weeks, we will seek government approval for a long-term fund that could be drawn upon in the event of an aging population or other structural spending pressures,” McGrath said.
