Workers and employers will have to bear the financial burden of the Government’s plans to keep the state pension age at 66.
RSI contributions will increase in the coming years to ensure that the retirement age does not increase.
While the Taoiseach promised Fianna Fáil party colleagues that the retirement age would remain unchanged, the Fine Gael Minister of Social Protection said people should be offered flexibility around the age at which they retire, which may counteract the need for PRSI increases.
Fine Gael fought the last general election on the grounds of raising the state pension age to 67 this year, but abandoned it during talks for the government program.
“There are many countries that have a flexible retirement age and I think that is a model that we need to look at here in Ireland,” said Heather Humphreys, Minister of Social Protection.
PRSI increases are not expected to be introduced in the next budget later this year, but will be gradually increased to allow people to retire at 66 and deduct the state pension.
Senior government sources suggested that different rates of pension payments, linked to when a person stops working, could be introduced.
This can mean that people who retire at 66 get less money than someone who stops working later in life.
However, others in the government believe that this policy should not be followed as there are significant disadvantages to implementing the proposal.
“You are essentially asking people to outline their own life expectancy, which I think is not good policy,” a source said.
There are also discussions about reducing the Universal Social Charge (USC) to compensate for any PRSI increases, but sources said it is not something that will be looked at in the budget.
Debate over the retirement age was sparked by Taoiseach Micheál Martin, who told his parliamentary party that he did not believe the age for the state pension should rise to 66.
But he said PRSI contributions would have to increase to pay for it. He also told the meeting people should be allowed to work after 66 if they want to and continue to pay PRSI so that they can qualify for a full pension. After the meeting, Mr Martin said he was not trying to subdue Ms Humphreys, and difficult decisions would have to be made around PRSI.
Ms Humphreys said last night she was confident the three coalition parties could reach an agreement.
“I agree with the Taoiseach that there should be flexibility,” she said.
“Depending on your job, some people are physically unable to keep working, while there are others who are very happy and want to work a little longer. So I think we need to find a balance here and we need to give people options so that they can make decisions that best suit their own circumstances. ”
Tánaiste Leo Varadkar has previously suggested that PRSI contributions for employers should be increased to pay for the retirement age remaining at 66. A source from Fine Gael said the “hard-pressed workers will have to pay for it all again”.
The Green Party, which campaigned in the last election to keep the retirement age at 66, is reportedly in favor of raising PRSI to pay for the measure.