The Irish public pension system could face significant strain without reforms, with government analysis revealing that, by 2040, the cost of providing pensions will have nearly doubled in real terms compared to 2025, and will triple by 2060.

The government's Future Forty analysis revealed that pension costs are set to rise significantly under a central scenario, which reflects the core assumptions across all future trends, whilst growth is set to slow down.

According to the analysis, whilst the average annual growth rate for all expenditure is projected to be 2.1 per cent, some expenditure items are projected to grow at a much faster rate. 

Pensions were high on this list, as the report revealed that expenditure on climate change (6.4 per cent), long-term care (3.6 per cent), and pensions (3.1 per cent) will increase most rapidly.

The slowdown in growth rates means that the overall scale of expenditure will change over time, as the modelling suggested that, by 2065, the most significant portion of public expenditure will be age-related, with healthcare, long-term care and pensions accounting for 46 per cent of total expenditure.

The pensions projections in the report cover old-age and illness/disability pension expenditure from the Department of Social Protection, plus all pension expenditure within the public sector.

The report suggested that the country's ageing population is a key factor in this increase, as it found that Ireland’s old-age dependency ratio will rise "significantly" over the coming decades.  

This is expected to place significant pressure on public finances, pensions and healthcare services.

Indeed, the analysis found that the cost of maintaining the health and long-term care systems will nearly double by 2045 and will continue to increase throughout the time horizon at a more rapid pace than other areas of public expenditure.

Demographic changes are set to have a broader impact on the labour market too, as the analysis showed that the most significant drag on economic growth will be a plateauing of both productivity and availability of labour in the 2040s.

According to the research, as the labour force reaches a peak in the 2040s, the share of workers to the overall population will begin to drop, with there being 115 individuals in the labour force for every 100 non-workers by 2045. 

However, it suggested that continuing to enhance the management of migration can help sustain a larger working-age population, alleviating some of the pressures from these demographic shifts.

In addition to this, it said that proactive policy measures to futureproof Ireland’s pension and healthcare system will be "essential" in ensuring long-run economic

Commenting on the Future Forty report, Minister for Finance, Paschal Donohoe T.D. said: "Ireland has transformed in the last four decades from an emerging, to a highly advanced, economy.

"This pace of change has been remarkable and unlike many other countries across the globe. It is unrealistic for us to expect it to continue at this pace.

"Powerful forces are already reshaping economies and societies across the globe. Climate change is no longer a distant risk; its impact is being felt at home and abroad today.

"Meanwhile, the green and digital transitions are transforming how we work, communicate, and live. Continued global integration and cooperation can no longer be taken for granted. Demographic shifts, such as ageing, are having profound effects on societies - a challenge Ireland must confront."

The findings of the Future Forty report are set to help inform work to address these concerns, as Donohoe explained that "“ultimately, Future Forty is not a prediction...it is a tool that provides us with an evidence base to guide us over the long term".

He continued: “Future Forty does not offer a baseline or a singular forecast, instead it models over 2,000 outcomes, with the results ranging from positive to very challenging.

"It highlights risks while underlining opportunities to better inform the decisions we make today.”

However, the government also emphasised that, although stark, these projections are consistent with the long-term trajectory across many advanced economies.

Indeed, comparisons with international peers, using OECD Debt-to-GDP forecasts, show that under the central scenario, Ireland’s projected debt levels remain lower than those of New Zealand, the United Kingdom, France, Finland, the United States and Germany.

And pension sustainability issues are already emerging in some of these countries, as the UK, for instance, has recently seen growing scrutiny over the cost of the state pension, with "tough but necessary" decisions expected in the upcoming budget as a result of the fiscal strain being faced.

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