Pensions: Why not just let people continue to work, tax free?

I was 37 this month, and whereas I may look it, or going by the rapidly expanding grey in my beard, may look like I’ve overshot it, I don’t feel it. That’s a common reaction. The fact is, due to better healthcare and diets we do not age as harshly as our forefathers. Sixty today is not what it was, bad hip and cataract inflicted, 30 years ago. We’re living longer, and as a result it makes sense that there has to be some sort of linkage between retirement age and life expectancy.

So, why not sweeten the bitter pill? Why not let people who are eligible for the state pension continue to work, if they wish, and in return for postponing claiming the state pension not require them to pay income tax. Obviously, we’ll have to have upper thresholds to stop the creativity of the Irish turning the whole thing into a tax fiddle, but the logic is sound, surely? It saves the state money, because it does not have to fork out a pension for a few more years. It gives the citizen a substantial boost before retirement, and helps reduce pensioner poverty. And it keeps someone still willing to make a contribution in the workforce. Surely it is worth at least discussing?

Of course, one of the anomalies we’ll discover is that many people will be surprised to find that they didn’t actually pay that much tax in the first place, and will be pointing the finger at those who did, roaring about “unfairness”. Perhaps they will even demand compensation for not having been heavily taxed enough?

2 thoughts on “Pensions: Why not just let people continue to work, tax free?

  1. There will of course be anomalies, but many of those anomalies exist at the moment.

  2. The biggest problem with that is that it’d heavily bias the jobs market in favour of over-65s, and really shaft younger people. Say a 30 year old earns €40,000 per annum. And they pay 10% of that in income tax, meaning that they earn €36,000 after tax.

    Wouldn’t it be in a company’s interest to simply hire someone over 65, and pay them €37,000 (or less), safe in the knowledge that they can get €40,000 worth of labour, but pay no tax.

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