The age at which people qualify for the State pension will be increased under a framework put forward by the Government today.

The Taoiseach today announced a major reform of future State, private and public service pensions. Under the new National Pensions Framework, the age at which people qualify for the State pension will increase over time - to 66 years of age in 2014 , 67 in 2021 and 68 in 2028.

The current system of tax relief at the standard and higher rates is to be phased out - instead a State contribution, which will apply to existing occupational and personal pension schemes, will equal 33 per cent tax relief. The mechanism for the delivery of this has not yet been finalised.

A new pension scheme for new entrants to the public service will take effect from 2010 under the proposals.

The State pension will stay as the fundamental basis of the pension system in the State, and "every effort will be made by the State to keep the value of this pension at 35 per cent of average earnings".

Under the framework, there would also be a new supplementary pension scheme to give extra retirement income for employees who are not already in a pension scheme. Those earning above a certain income threshold will be automatically enrolled in this new scheme, and the State and employer will support this by providing matching contributions.

Under a new auto-enrolment scheme, employees aged 22 or over will automatically enrolled unless they are a member of their employer’s scheme, which provides higher contribution levels or is a defined benefit scheme. Employees will be required to make a fixed percentage contribution, and there will be matching State and employer contributions. A range of funds, including a low-risk default option, will be made available.

Employees can opt out, but they will be re-enrolled every two years.

Announcing the framework, Brian Cowen said: ‘There are significant challenges ahead for us as a society. We are living longer, which is a wonderful achievement, but we know that the impact of population ageing is very challenging.

"This framework sets out the way in which we intend to protect our pensioners, now and in the future, and to encourage and support people to provide for their retirement savings in a fair, transparent and sustainable way.”

Commenting, Minister for Social and Family Affairs Mary Hanafin said: “It has increasingly become evident that many Irish workers are not saving enough for their retirement and will be faced with a serious drop in income when they retire. Previous efforts at encouraging people to invest in personal pensions have not been as successful as expected, especially among low to middle income earners.

"Having examined all options and looked at international experience, the Government has decided that a new auto-enrolment supplementary pension is the best approach to take. This will ensure that those on low to middle incomes receive supports from both the Government and the employer,” she said.

The new National Pensions Framework follows a public consultation process that began with the publication of a Green Paper on pensions in October 2007. It was also informed by the proposals in the McCarthy report and the report of the Commission on Taxation.