THOUSANDS of Irish people could face a hike in their PRSI contributions to cover State pensions gap, as the number of those aged 65 and over rising.
Full-time workers, employers, and self-employed will see their tax bills increase by 0.7 per cent over the next five years.
An initial hike in PRSI rates of 0.1 per cent were introduced for workers and employers from last October 1.
Then, for the next three years, there’ll be a total hike of 0.7 per cent to address shortfalls in social insurance income over the coming years.
In a briefing document for Social Protection Minister, Dara Calleary, department official said measures must be considered to address the sustainability of the Irish pension system.
They added the new measures were an alternative needed to cover the increasing State pension age.
The document stated: “Sustainability of the pension system will remain an issue, with the need to review contribution rates following completion of the next Statutory Review of the Social Insurance Fund in 2027.
“Further PRSI rate increases from 2025 to 2028 inclusive, making a grand total of 0.7 percentage points for the five years, were agreed by the government on 21 November 2023.”
According to the document, the next actuarial review for this year is set to be completed in 2027.
It also noted that Irish fertility rate were “currently below the replacement rate in most developed countries,” adding people were living longer.
It added: “It is vital to ensure a sustainable financing model so that the current workers, who fund current state pension payments through their PRSI, can expect to receive an adequate pension themselves when they reach retirement age (the equity objective).
“In the absence of any changes to PRSI rates or subventions from the state, annual projected Social Insurance Fund expenditure in excess of income is anticipated to reach €0.5bn by 2035 and €3bn by 2040, increasing markedly thereafter.”
It would require a working-age population of almost 7.2 million people to maintain the current dependency ratio of pensioners by 2051.
This would be a million more taxpayers than the current CSO’s projections.
PAYMENT JUMP
It is expected that the average worker would pay around €45 – €50 extra in PRSI during a full year.
After all the increases have accumulated, in five years this works out at an extra €335 extra per year for an employee on €45,000 a year, which is the average salary in Ireland.
Full-time workers on minimum wage will have to pay an additional €178.55 in contribution each year.
And the employer PRSI threshold where the higher employer PRSI rate takes effect is being increased from €441 to €496 per week.
Department secretary general John McKeon said in a letter to the minister that the key legislative changes introduced are necessary to “ensure the sustainability of the Social Insurance Fund.”
He noted: “Key legislative changes were introduced enabling the introduction of enhanced pension provision for carers, pay-related benefit for newly unemployed jobseekers and pensions auto-enrolment, together with a phased increase in PRSI rates necessary to ensure the sustainability of the Social Insurance Fund.”
The Department of Social Protection added that annual surpluses in the Social Security Fund are expected until 2033.
It also estimated that an estimated 800,000 workers would qualify for a new Automatic Enrolment Retirement Savings System, which is expected to be launched later this year.
