The €5 hike in the State pension in last week’s budget, along with delays in increasing retirement age and introducing automatic enrolment into savings plans, all threaten the sustainability of the pensions system over the long term, according to a new study.

The Mercer study points to considerable future challenges as the population ages due to the topping up of what is described as a “generous” pensions system, and a failure to address core issues.

Also adding to the problem is a need to “urgently address” the inadequacy of retirement incomes for women, which lag those of men.

Overall, the Republic of Ireland’s pension system is ranked 13th out of 43 economies in the latest ranking. While the State has risen one place in the rankings versus the prior year, this masks a poor performance in terms of sustainability, for which the State comes in 25th place, compared to 7th for pension adequacy and 11th for integrity.

Income

The State’s retirement income system comprises a flat-rate basic social security scheme and a means-tested benefit for those without sufficient social insurance contributions.

Voluntary occupational pension schemes and personal pension schemes provide supplementary income in retirement but, according to the Central Statistics Office, these currently only cover about 65 per cent of the working population.

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