Change In State Pension Age – To Retire Or Not To Retire?

Author:Ms Peggy Hughes and Deborah McHugh
Profession:Mason Hayes & Curran
 
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Following the changes, employees with a contractual retirement age of 65 and who would currently expect to receive a state pension at that age will no longer receive a state pension until they reach 66 years of age. This may leave some individuals with a gap in income for that year of €12,000 approximately which they will not now receive until they reach age 66. Unless those affected have another source of income to sustain them for that "gap year" they will, no doubt, look for replacement income.

Among the possible options, some employees will want or simply need to work beyond their contractual retirement age and may ask their employer to facilitate this. In responding to requests to work beyond the current contractual retirement age, employers need to be aware of the employment law implications of their decision and how their decision might also impact on any pension scheme they operate.

There is no statutory compulsory retirement age in Ireland, however, employers often specify a contractual retirement age to coincide with the current state pension age of 65 or have a well-established retirement age. Employers already face challenges in seeking to retain a specified contractual retirement age and those challenges are somewhat complicated by the interplay between relevant domestic and EU legislation and case law. It is likely, however, that more employers will be faced with considering these difficult issues on foot of the change in state pension. For those employers who want to insist on maintaining their current retirement age of 65, it is likely that they will have to objectively justify that retirement age and demonstrate that it is legitimate, proportionate and necessary. Employers would be well advised to seek legal advice on these issues on their options from an employment law perspective.

The trustees of related occupational pension schemes need to be mindful of any implications for their pension scheme of the change in state pension age. Trustees should be reviewing their governing scheme documents to assess whether the scheme is integrated with the State Pension (Transition) and identify the implications for the scheme if it will have to be operated on a non-integrated basis from 1 January 2014. Integration, for this purpose, means that the manner in which benefits or contributions are calculated take account of the State Pension (Transition). Depending on the wording of the pension scheme documents, there may be increased...

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