As the overall global population continues to grow, so too does the number of seniors requiring financial assistance in their twilight years. According to recent reports, the world is currently facing a “rapidly” ageing population, which is expected to put increased pressure on State pension schemes. This is due to a variety of factors, including longer life expectancies, declining birth rates, and reduced savings rates. In this article, we’ll take a closer look at the impact of this demographic shift and what it could mean for future generations of retirees.
According to a report by the Irish Fiscal Advisory Council (IFAC), Ireland’s ageing population will impose greater pressure on the country’s ‘pay-as-you-go’ system for pensions. This demographic shift, which is set to cause Ireland’s ‘old-age dependency ratio’ to increase from 22% in 2020 to 47% in 2050, will lead to significant spending on health care, long-term care and pensions. To tackle these issues, the IFAC recommends switching to a long-term approach, which could reduce the burden on future taxpayers. The IFAC suggests raising contributions to employee and employer PRSI rates by approximately 3.5 percentage points, however, this is still less than half the increase required under proposals from the Pensions Commission. The report also proposed lowering the PRSI rate if ‘excess’ corporation tax receipts were used to finance future pensions.
It is clear that the issue of an ageing population and its impact on the State pension cannot be ignored. As life expectancy increases and birth rates decrease, there will be an increasing strain on the system to provide for a growing number of retirees. While there are no easy solutions, it is important for policymakers to address this issue in a responsible and sustainable manner to ensure that the State pension remains a viable option for future generations. We must prepare for the challenges ahead and work towards fostering an environment in which all citizens can enjoy a secure and dignified retirement.
