Pensions

‘My big fear is being old and poor’

When Mary Dunphy was approaching the retirement age of 65 she started looking for a new job; but her efforts were to be in vain.

On one occasion she persuaded a much younger friend, who had less experience and qualifications to apply for advertised positions suited to her particular field at the same time as she did.

“She was inevitably called to interview on each occasion when my applications were met with silence,” Dunphy recalls, as she bemoans the perceptions that employers have that anyone over the age of 50 “regardless of qualifications and experience is considered to be unemployable”.

Unfortunately, Dunphy’s experience is becoming all too common. As more people decide to stay on in the workforce after the traditional age of retirement – either for personal or financial reasons – employers appear unwilling to embrace the trend.

In part, the drive towards getting people to work longer is coming from the State. After all, it has a keen interest in keeping people working longer; the longer they work, the less of a burden they will be. With costs of servicing the State pension expected to rise from just over €6.5 billion in 2015 to about €8.7 billion in 2026, it’s a no-brainer.

Already, to save costs, the qualification age for the State pension has risen, and it will increase to 67 in 2021 and 68 in 2028. This means that anyone born after 1954 won’t be able to access the State pension until they are 67, while those born after 1960 will be 68 before they can draw it down.

And the pension age may yet rise even further. Earlier this year, then minister for social protection Leo Varadkar mooted that he wanted to push forward legislation which would give people a larger State pension if they stayed in the workforce longer, while means testing the State pension of €235 a week has also been floated as an idea.

Now, the economic think tank, the ESRI, has just suggested that 70 should be the new age for the State pension.

We can’t afford to stop

While the State wants people working later to shore up its funding shortfall, it’s not the only driver. Many of us simply won’t be able to afford to stop working.

Just 53 per cent of the population has a personal pension, which means that 47 per cent of the Irish workforce will be depending on a State pension of €235 a week. And even those that do have another pension, either from their job or through a personal retirement savings account or other structure, probably won’t have enough. Data from Irish Life shows that the average member of an Irish defined contribution scheme is set to retire on a pension of just 17 per cent of their salary.

“The reality is that some people retiring may be in a very vulnerable position, if they have no pension and ongoing financial commitments,” says Eilis Barry, chief executive of the Free Legal Advice Centre.

The closure of many defined benefit schemes, which guaranteed a third or half of final salary in retirement, means that the generations yet to retire won’t be making too many opera trips to Italy or six-week winter holidays in Spain. Early-bird dinners and trips to Lidl are more likely.

And the long-term trend of lower interest rates means that a generation of retirees may eschew annuity type products, which pay a guaranteed income for life, in favour of approved retirement funds whereby they keep their investments vested, and rely on draw-downs for income.

But how much of this approved retirement fund is it safe to spend? And what if market turbulence hits your funds badly and you can no longer replenish them?

Defined benefit or final-salary pensions will soon be consigned to history, leaving generations of workers relying on their own savings – and increasingly on the State.

Women ‘penalised by the State’

Women, in particular, are staying in the workforce much longer, but whether that’s for the pleasure they get in working, or because of inadequate pension plans, is unclear.

In 1998, just 6,900 women aged 65 or over were working; today that figure is almost 20,000. A study from Public Policy last year found that the mean weekly pension income of men is €397 – 58 per cent higher than that of women, €252 – and women are far more dependent on the contributory pension, accounting for 49 per cent, on average, of total income.

Women are being penalised by the State, Dunphy believes.

It’s a curious anomaly of Ireland’s State pension system that if you worked in the 1960s, 1970s or 1980s, then stopped to raise a family, before re-entering the workforce, you could end up with a smaller pension than if you had only started working in your later years. But for thousands of women like Dunphy, this has been their experience.

Dunphy began her working life in 1966 as a clerical assistant in the public service. Six years later she got married, and due to the “dreaded marriage ban”, (removed in July 1973), she was made redundant.

Living in Balbriggan, north Dublin with her husband and three daughters, Dunphy reared her family and embarked on a number of voluntary roles.

But she still harboured an ambition of returning to the workforce. In 1998, at the age of 49, she did a Fás course, subsequently interviewed for a position as a medical secretary in a north Dublin surgery, got the job, returned to the workforce, and after a few years became practice manager. She left as she was approaching 65.

When she reached 65 the Department of Social Protection averaged her PRSI contributions over 47 years, which meant that a third of her contributory pension was deducted.

“If I had never worked until 1998 I would be in receipt of a full old age pension,” she says.

It’s a situation Dunphy deems to be deeply unfair, noting that the Homemaker’s Scheme, which allows 20 years of time spent out of the workforce to be disallowed against your PRSI record, was only introduced in 1994, and “so deliberately omits all those who were forced to leave work due to the marriage bar prior to 1973”.

“Those same women who were relied so heavily on by the State to give their time post-marriage to caring duties are being penalised heavily and shamelessly by the same State,” she says.

In the end retirement wasn’t for her.

Despite turning 67 last year, Dunphy was called back to her original position at the medical practice on a short-time basis – and hasn’t left yet.

“I do at 68 find this quite tiring to be honest, but am very pleased to feel that I am still appreciated as being capable of contributing to the workforce.”

We’re already working longer

So far so simple perhaps; the State can’t afford for us to retire, and we ourselves won’t have saved enough to retire, so the solution will be to keep working.

But more of us are already working past the traditional age of retirement. In less than two decades, the number of older people staying in the workforce has risen sharply. In 1998, just 48,000 people aged 60-64 and 34,300 people over 65 were still working. Today, according to the Central Statistics Office, some 112,000 60-64-year-olds are still working, and 66,000 people aged 65 and over are still in the workforce – roughly double in both age groups.

Where are they working? Not for high-tech multinationals in Dublin’s Silicon Docks, nor waiting tables in restaurants. Figures from the CSO show that a disproportionate number of the over-65s work in the agriculture, forestry and fishing sectors. These areas account for more than a third of 65-plus workers – compared with just 5.3 per cent across workers of all ages.

So while there has been a shift towards working later, it appears to be driven partly by self-employed farmers – rather than traditional organisations embracing late-in-life workers.

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