By Ger Molloy – The Irish Channel
The warning bells are tolling for Ireland’s economy. Just as German Chancellor Friedrich Merz cautioned his people to prepare to work “longer and harder” to support a faltering economy, Ireland faces a strikingly similar demographic and fiscal cliff. While the current State pension age in Ireland is 66, the financial trajectory suggests a future where Irish citizens, too, must prepare for a retirement age reaching 73 by 2060—a seismic shift for social and economic life.
The stark reality is one of an accelerating old-age dependency ratio. In 2022, there were roughly four people of working age for every person over 65 in Ireland. By 2050, this ratio is projected to fall dramatically to about two-to-one. This rapidly aging population, coupled with the success of people living longer and healthier lives, means the burden of financing an ever-growing retired population on a smaller base of workers is becoming unsustainable.
The Fiscal Time Bomb
Ireland’s pay-as-you-go State pension system is heading for deep trouble. The fund supporting the pension system is forecast to begin recording multi-billion euro deficits within the next two decades. Age-related expenditure—pensions, healthcare, and long-term care—is projected to be one of the largest increases in the EU, growing by a significant percentage of national income over the next three decades. Without radical policy reform, this will necessitate a combination of substantial tax increases, cuts to benefits, or, most likely, a further increase in the State pension age.
Policy decisions in recent years, which have been reluctant to raise the pension age as originally planned, have only delayed the inevitable, increasing the eventual cost. While the government has established funds like the Future Ireland Fund to help offset some of these projected costs, experts from the Irish Fiscal Advisory Council and the Central Bank have repeatedly warned that further, more fundamental reforms are essential.
Learning from the Continent
The German expert panel recommendation to raise their retirement age to 73 by 2060 serves as a powerful indication of the direction Ireland is also headed. Ireland’s demographic transition is one of the fastest in Europe, moving from one of the youngest populations to one of the oldest in a relatively short timeframe. This rapid shift necessitates proactive and long-term planning.
A phased increase in the State pension age to 67 by 2031, as previously recommended by the Pensions Commission, may only be the first step. To achieve genuine long-term fiscal stability, particularly with the scale of projected age-related expenditure, a gradual, decades-long increase towards 73, mirroring the German discussion, appears necessary.
A New Social Contract
The conversation must now shift. It’s no longer about if people will work into their late 60s and 70s, but how this will be managed fairly. Policy must support flexible working options, combat ageism in the labour market, and invest in reskilling and health to ensure that those who are required to work longer are able to do so in quality, sustainable employment.
The alternative—a reliance on higher taxes and mounting national debt—will disproportionately impact younger generations, diminishing their living standards. For the sustainability of the State’s finances and intergenerational fairness, the Irish public must accept that a new social contract, demanding a longer working life, is the only fiscally prudent path toward securing the national finances.