Teagasc has highlighted the “stark reality” that low-income farmers may not qualify for the contributory or non-contributory state pensions.
Researchers at Teagasc and the National University of Ireland (NUI) Maynooth have been investigating the effect that proposed changes to the state pension system will have on farmers in Ireland.
Not qualifying for the contributory or non-contributory state pension would leave farmers at risk of working long into their retirement years or becoming financially dependent on family members in their old age, researchers warn.
This investigation was carried out by Michael Hayden, assistant professor of accounting at NUI Maynooth; Bridget McNally, associate professor of accounting at NUI Maynooth; and Anne Kinsella, senior research officer and economist at Teagasc Rural Economy and Development Programme, Athenry.
The government’s Roadmap for Pensions Reform 2018 to 2023 aims to modernise Ireland’s pension system. However, the researchers said that it “fails to fix the ongoing issue for farmers who don’t qualify for any state pension”.
Through a new study, Teagasc and NUI Maynooth “have illustrated this stark reality”, and recommended a model that will give farmers undisputed entitlement to a contributory state pension.
Ireland has an ageing farming population, and private pension coverage for Irish farmers is relatively low. According to Ifac, as of 2019, 62% of Irish farmers aged over 65 had no private pension.
For Irish farmers aged between 40 and 65 years old, 52% either had no private pension or had a private pension that only covered one spouse.
Prof. Hayden noted: “Average annual farm income is low, and a lack of affordability for private pensions is a major contributing factor to low coverage. To receive an adequate income in their old age, farmers face working into their later years; liquidating farm assets; or relying on the state pension.”
The researchers designed hypothetical farm case studies to include farmers with no private pension and variable pay-related social insurance (PRSI) contribution histories when assessing their entitlement to the State Pension Contributory (SPC) and/or the State Pension Non-Contributory (SPNC) payments.
They found that farmers who do not have sufficient PRSI contributions to qualify for the SPC are unlikely to qualify for the SPNC, unless they get rid of the majority of their farm assets.
Teagasc researcher Anne Kinsella said: “For a single farmer to qualify for full SPNC, they cannot have capital assets exceeding €50,000. For capital assets, between €50,000 and €100,000, they would receive a reduced pension only. Capital assets over €100,000 would result in no entitlement.”
“We also found that many farmers and their partners who have worked most of their adult lives on the family farm may not have sufficient PRSI contributions to qualify for full SPC,” Kinsella added.
She went on: “To be entitled to SPNC, a farmer who, on retirement, wishes to transfer the family business to a designated successor, cannot retain anything other than a few acres of land. This means a perfectly understandable wish to retain assets could potentially leave them with no entitlement to a state pension.”
The most recent reforms of the state pension system “do little” to reduce the lack of coordination between succession planning; retirement income planning; old age income security; and generational renewal, Teagasc says.
Prof. Bridget McNally said: “Objectively, a compulsory PRSI contribution system that gives farmers and farm successors realistic access to the SPC would be a positive development for the farming community.
This system would require mandatory PRSI contributions for farm successors and partners working on farms who are not currently in the PRSI system, with a flat rate amount for those with income below a specified limit.
“There needs to be a framework where farmers paying their way can rely on the security of the SPC. This way decisions about farm transfers to the younger generation can be less financially pressurised and less driven by fear of income vulnerability in old age,” Prof. McNally added.