The Minister for Public Expenditure has said the planned increase in the pension age to 67 on 1 January will not proceed.
Michael McGrath made the announcement during his Budget 2021 speech.
Mr McGrath added: "A Pensions Commission will be established and the Government will consider the Commission's report in due course."
Minister Michael McGrath says the planned increase in pension age to 67 on 1 January 2021 will not proceed, with a Pensions Commission to be established | @RTEBusiness | Follow live updates: https://t.co/kBBnomV4qY pic.twitter.com/C1YpRuERQr— RTÉ News (@rtenews) October 13, 2020
The last government announced plans to increase the age of retirement to 67 next year and 68 in 2028, but it became a major issue during the general election campaign.
A spokesperson for the Minister said that to retain the pension age at 67, it will require amendment to primary legislation and the Government will bring the necessary legislation before the Oireachtas later this year.
The increase in the pension age in 2021 would have generated a saving of €220million in the Social Protection budget.
By not proceeding with the change there is therefore an effective cost of €220 million, hence it was included in the Budget documentation.
The Commission on Pensions is to examine a range of issues including contributions, calculation methods, sustainability, eligibility and intergenerational fairness.
The Terms of Reference for the Commission are currently being developed and options for its membership are being considered.
Responding to the announcement, Sinn Féin's Finance Spokesperson Pearse Doherty said people should be able to retire at the age of 65 and able to draw a State pension at that time.
However, he said that at the moment thousands of 65-year-olds have been forced onto jobseeker's payment after a lifetime of work.
The Fiscal Advisory Council said it knew the Government had "kicked the matter to touch" when it announced the establishment of a Pensions Commission during the summer.
In a report published during the summer, the Fiscal Advisory Council said increasing the pension age as planned in 2021 would add €575m to spending.
The Long-Term Sustainability Report looked at public finances over the coming decades to 2050, as the population ages and the economy continues to grow.
That report said that despite significant improvements in life expectancy, the retirement age in Ireland had remained relatively constant over time.
The report noted that the new Programme for Government envisaged keeping the pension age at 66 pending a review.
It said a scenario where the pension age rises partly in line with life expectancy would produce annual savings of 0.3% of Gross National Income.
Meanwhile, organisations representing older people have expressed disappointment in Budget 2021.
Active Retirement Ireland has said that it has fallen short on delivering the society that was promised by Fianna Fáil, Fine Gael and the Green Party in the Programme for Government.
The organisation has said it is "especially disappointed" that the Government did not increase the State pension.
Maureen Kavanagh, CEO of Active Retirement Ireland, has said older people are spending more time at home as a result of the pandemic, which is leading to an increase in heating bills.
She has said an increase in the State pension would have helped older people deal with the rise in the cost of living.
The organisation ALONE has also expressed concern over the increase in heating bills.
Its CEO Seán Moynihan has called for more detail as to whether energy usage and provider prices will be offset by the €3.50 fuel allowance increase announced today.
The organisation has also said it is "disheartened" to see that the Government "failed to set the State Pension at the average weekly wage" which it says was agreed in the Roadmap for Pensions Reform 2018 - 2023.
ALONE says older people were not mentioned enough in today's budget.