Many Irish farmers find themselves in a situation at retirement age where they fail to qualify for the full contributory State pension or the non-contributory State pension, remaining financially dependent on farming income.
Without a viable retirement means, farms cannot transfer to the next generation.
older farmers remaining in farming into later age is an issue for which national policies, such as pension schemes, are partly responsible
Generational renewal, one of the objectives of the current CAP, often focuses heavily on supporting entry into the industry with less emphasis on encouraging older farmers to retire.
According to the European Commission, older farmers remaining in farming into later age is an issue for which national policies, such as pension schemes, are partly responsible.
A study recently published by Maynooth University and Teagasc examines State pension policy for the farming community and argues that it has a role to play in addressing some of the challenges facing the sector.
They propose that consideration be given to a compulsory PRSI contribution system
According to researchers Michael Hayden, Bridget McNally and Anne Kinsella, the most recent reforms of the State pension system have and will have little impact on the farming community and, indeed, on the self-employed in general. They propose that consideration be given to a compulsory PRSI contribution system, requiring a number of changes, which gives all farmers and farm successors realistic access to a contributory State pension.
The study was based on hypothetical farms reflective of real life, albeit quite modest farms. It found that farmers who had insufficient PRSI contributions to qualify for the contributory State pension were unlikely to qualify for the non-contributory State pension unless they divested of all but a few acres of land.
In the case of a farm valued at €675,000 (60ac farm based on average land prices), the imputed income from capital assets was found to be €133,540 annually – substantially above the potential farm income.
The calculation of means for the purposes of the contributory State pension is not straightforward
The history of PRSI for the self-employed means that retiring low-income farmers under the current regime often fall short of contributions for the contributory State pension unless they consistently worked off the farm. This leaves them looking to the non-contributory State pension.
However, means testing rules mean that low-income farmers, even with a small farmholding, can fail to qualify for either a contributory State pension or a non-contributory State pension.
The calculation of means for the purposes of the contributory State pension is not straightforward and incorporates cash income, the value of capital (investments) and any property owned other than the private dwelling.
With almost one-third of farmers over 65 and only 5% under 35, a dual policy emphasis is necessary to accelerate generational change. While it is right and just that everyone pays their way, imputing an income based on land assets into pension calculations, which is substantially above the farm income, appears simplistic and unfair. While farmland is owned, the fact that an acre only transacts on average every 250 years does distinguish this from other types of capital assets. Any meaningful generational change can only happen when older farmers can be assured of a viable means to transition from farming.