Assessing the Impact of Pensions Policy Reform in Ireland: the Case of Increasing the Pension Age

Abstract

Although demographic ageing will affect Ireland later than many EU countries, by 2050 it will result in significant pressures on the public pension system. Recent reform in Ireland has attempted to address these pressures by increasing the incentive to save for retirement and by introducing partial funding for existing Pay As You Go (PAYG) public servant and state pension schemes. Attempts have also been made to improve the poverty effectiveness of public policy instruments. Although there have been substantial policy interventions to increase the labour supply of groups such as married women, lone parents and the long-term unemployed, there has been little emphasis on increasing the labour supply of older workers. This paper uses a new dynamic microsimulation model to simulate life-course demographic and labour market histories for a cross-section of the Irish population. These simulated life-histories are then been used to simulate pension and other public policy at the micro-level for the Irish population. We use the model to assess the implications for budgetary and social policy objectives (poverty reduction and income smoothing) of raising the effective retirement age.