There has been much focus on the state pension of late, specifically how it could be funded into the future.

Paid at a weekly rate of €265.30, it is relatively generous by international standards.

According to a study of state pension regimes in thirty countries across Europe carried out early this year by financial advisors, Almond Financial, the state pension here is paid at a rate that is just above the breakeven point for earnings versus the cost of living - albeit a steadily rising cost of living.

It puts Ireland around middle of the table in the rankings.

The funding of the entire regime has come under the spotlight recently with some innovative proposals being proffered to make the system more sustainable.

One option is to give retirees the option of deferring receiving the state pension until later in life and to benefit from it at a higher weekly rate of payment then.

So, could it be worth the wait?

Funding gap

The Government decided last year to maintain the state pension age at 66, despite recommendations to do otherwise in a report form the Pensions Commission.

The Commission had recommended gradually increasing the pension age to 67 in 2031 and to 68 in 2039.

A report from the Fiscal Advisory Council in recent weeks set out the extent of the challenges facing the state when it comes to funding the state pension as well as pensions for public servants.

It recommended the establishment of a dedicated State pension fund while also using windfall receipts of Corporation Tax.

It models a number of scenarios but it concludes that a 3.5% increase in the long-term combined PRSI contributions of workers and employers - phased in between now and 2027 - would be necessary.

The proceeds, topped up by windfall corporation tax receipts, should then be invested in a ring-fenced fund.

The logic is that the so-called 'baby boomers' (currently older members of the workforce) would pay more towards essentially pre-funding the cost of their retirement, thus easing the pressure on younger workers when the State pensions bill rises sharply from 2040 onwards.

Changing population dynamics

The Council has for long warned the Government of the looming cost of funding pensions as the proportion of retired people to the working age population is set to double in the coming decades.

Today, there are approximately four people of working age for every retired person in the State.

By 2050, that is set to dramatically change to around two people of working age for every retired person.

The Council says that by increasing PRSI rates now, it would effectively spread the bill among the working population rather than leaving it to future generations to foot the bill at a much higher cost later on.

Deferred gratification

The Government has already taken one step towards removing immediate pressure from the system in the years ahead.

It involves the introduction a more flexible pension age model.

The new regime is scheduled to take effect next January and will see workers having the option of continuing to work up to the age of 70 rather than taking the state pension at the current qualifying age of 66.

In return, deferred recipients would be entitled to a higher weekly payment of €315, compared with the current rate of €265.30 per week.

For those who don't want to retire at 65 or 66, it's a good option.

However, typically those who tend to desire working on beyond retirement are generally not employed in physically demanding jobs and they're more likely to have occupational pensions too.

In truth, the state pension, while an important income source in retirement, will likely be supplementing their other pension incomes.

So, for those who will be largely, or entirely, reliant on the state pension, should they consider working through their late 60s and opt for the enhanced weekly payment at 70?

Value for money?

Currently, the annual state pension amounts to about €14,000 per year.

Deferring that by four years amounts to lost pension income of around €56,000.

Financial adviser Frank Conway, founder of the Moneywhizz website, did some calculations on whether it was worth opting for the later, enhanced payment.

He concluded that, factoring for the higher weekly rate of €315, the recipient would have to live until 89 to recover the lost income.

While life expectancy is improving generally, the reality is that most people will not live that long.

"While the State does offer extraordinarily generous tax relief for people saving into a private pension, the new offer for the flexible State pension needs to be significantly improved on if it is to provide a real financial benefit to those planning for their long-term financial wellbeing," Frank Conway concluded.

He calculates that the state pension would need to increase to around €400 per week for those that defer until age 70 for it to make financial sense.

"This higher rate would represent a real premium where they would claw back lost income by age 77 or 78 - without factoring for the impact of inflation," he pointed out.

"At this higher rate, recipients could expect to have a few years of life where their patience would really pay off."

Most not convinced

The insurer Lockton carried out some research on the appetite for working longer in exchange for the higher pension payment.

Fewer than one in four people surveyed said they would be encouraged to make the sacrifice, with one in ten explicitly stating that it just wasn't worth it financially.

Around a third said they would only consider it if they were unable to afford to retire at the current state pension age of 66.

While it may not be initially attractive at face value on purely mathematical terms, Ray McKenna, Partner at Lockton People Solutions Ireland pointed out that there were other benefits for employee and employer alike.

"The employer retains the benefit of experienced and skilled staff - such staff often have knowledge and skills which simply cannot be replaced," he pointed out

"For the employee, the benefits include the higher State pension, earning a wage for longer, and the greater sense of wellbeing that often comes from a daily routine and purpose, as well as interaction with colleagues."

While the Lockton study was conducted among the general population, the Retirement Council of Ireland surveyed a group of people aged over 50.

It found that over half - 55% - planned to continue working after they retire, but nearly all of them indicated they would do it part time.

Financial considerations have emerged of late as a key reason for continuing in employment as the rising cost of living and the inflationary environment bites, the study found.

For some, the option to defer retirement is a welcome development that will allow them to continue to make a meaningful contribution while continuing to earn.

For many others, financial realities may dictate that they will indeed have to avail of the deferred pension.