New report examines how the increase in the state pension age in 2014 impacted the retirement rate of 65-year-olds

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Today (Tuesday 3 October) the ESRI published Did increasing the state pension age in Ireland affect the retirement rate of 65-year-olds? The study examines whether the increase in the contributory state pension age from 65 to 66 in 2014 had an impact on the retirement rate of 65-year-olds in that same year.

In January 2014, the qualifying age for the Irish state pension increased from 65 to 66 years. Individuals born after 1st January 1949 could no longer qualify for the pension at age 65. Individuals born before this date could still qualify, provided they had the required social insurance contributions. As a result, 65-year-olds who were born in December 1948 could receive the state pension, while others born in January 1949 (one month younger) had to wait until age 66. By comparing the retirement rates of these two groups of individuals at age 65, this research attempts to assess the impact of the pension age change on the retirement decisions of those born after the cut-off point.

Key findings

  • There is no clear evidence that the change in the pension age impacted the retirement rate of those born after the cut-off point.
  • The retirement rate among the younger group of 65-year-olds who were born in January and February 1949 was very similar to the retirement rate of the older group born in November and December 1948.

Potential reasons behind the lack of any clear policy effect

  • Some 65-year-olds who did not qualify for the transition state pension may have been receiving Jobseeker’s Benefit as a type of de facto pension payment until they reached the age of 66. This is likely to have lessened the impact of the change on those born just after the cut-off point.
  • Due to a lack of sufficiently detailed data relating to a person’s work history, it was not possible to fully isolate individuals who had sufficient social insurance contributions to satisfy the contributory pension requirements. It is possible that the policy change may have had a larger impact on the retirement rate of this group alone. However, more detailed data would be required to establish this.
  • The existence of occupational pensions could limit the impact of the policy on retirement decisions, as individuals with such incomes could still choose to retire at 65 irrespective of the policy change.

Paul Redmond, Research Officer at the ESRI, commented:
“In the context of population ageing and the rising costs of state pensions, the age at which people retire is increasingly important for public policy. We have not found evidence of people reacting to the policy change in 2014. However, the analysis highlighted the need for improved data that allows us to fully identify an individual’s precise age, social insurance contribution history and private pension income, so that the impacts of future policy changes in this area can be effectively evaluated.”

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