FOR decades, men could look forward to retiring at 65 and getting the pension. For women, it was 60. Their eligibility was increased over ten years between 1995 and 2004 until they too reached the same qualifying age.
In 2009 the Rudd government lifted it to 67 for men and women but it was to be phased in from 2015, with six month increases every two years, starting from July 1, 2017. Now we’ve arrived, after almost thirty years, at a pension age of 67! But it could have been worse.
Almost ten years ago Treasurer, Joe Hockey, announced it would go to 70 by 2035. He asserted it was “highly probable a child born today would live to 150.” Really?
His move followed on from a report from the Commission of Audit, which recommended the qualifying age be linked to life expectancy. The thinking was because we are living longer than our parents and grandparents, we should remain in the workforce longer.
There was a huge backlash including a campaign led by National Seniors. A popular slogan at the time was: “Only someone who’s worked in an office their whole life would think you can work until you’re 70!”
In the run up to the 2019 election Scott Morrison dropped the age-70 target as Liberal policy. His deputy, Michael McCormack said it was “probably a step too far” adding “I think if you’re a tradie, or a brickie, or a shearer in rural and regional Australia you don’t want some suit in Canberra telling you you’re going to have to work until you’re 70,” he said.
At National Seniors, we were pleased the government “backed away from the unpopular idea” and called the decision “a win for common sense”. Now a group of academics has revisited the statistics and released a report saying a further rise is warranted to ensure the country has a sufficient supply of workers into the future. Macquarie University Business School Professor Hanlin Shang and his co-authors say there should be three more pension-age increases over the next 27 years. They suggest 68 by 2030, rising to 69 in 2036, and 70 by 2050.
Professor Shang says Australia’s low birth rate is one of the key factors.
“Less people in the working group and more in retirement will make the old age dependency ratio (OADR) higher,” he said.
“What this means is there is less working people to support elderly people. And with more elderly people in the population, this will create a burden for the government pension system.”
Professor Shang and his team should read, or hopefully re read, “The Age Pension in the 21st Century” by 2018 Actuary of the Year Michael Rice. He revealed the cost of the age pension as a per centage of GDP will fall, not rise in the decades to come. There will be far fewer full pensioners, and far more part pensioners and self-funded retirees.
The “burden” simply won’t be there. The pension was 2.9% of GDP when Peter Costello’s 2002 Intergenerational Report predicted it would grow to 4.6% of GDP by 2042. But it was it was just 2.7% of GDP five years ago, and Rice Warner projected “expenditure to fall to 2.5% of GDP by 2038.” It added “the downward trend will continue well into the future.”
It’s predicted to be just 2.1% of GDP by 2060. Why? Superannuation has been delivering, just as Paul Keating predicted. His “magic of compound interest” has been adding to the retirement incomes of millions. We reject calls for raising the age to 70 on both fiscal and social policy grounds. Many people exit the workforce because of ill health. We should consider a Canadian style system where you can opt to get the pension earlier but get a bit less.
We’ve also argued the best way to tackle declining participation is to provide incentives to those who choose to work longer. Our Let Pensioners Work campaign calls for a reduction in the income test taper rates so you can keep more of your pension if you choose to continue working. This is fairer than raising the pension age because it rewards people who want and need to work.
Pensioners who chose to work would benefit from extra income and their participation would also help the economy.
If you are on a pension, and you want to keep working it’ll be a win for the economy, it’ll be a win for the pensioners, and it will be a win for the government.
A note to politicians, our latest poll of more than two thousand people showed just 7% support the move to 70, 45% are fine with 67 and 46% want it back to 65.
An election winning policy would be to lower it back to 65 as they’ve just done in Canada.