Call for less burden, more choice in pension age
In July, the pension age increased to 67, but it could have been much older. National Seniors Australia’s Chief Advocate, Ian Henschke, tells how the pension age came about and the way forward for future improvements.
Two years is a big change when, for decades, men could look forward to retiring at 65 and getting the pension.
For women, it was 60. Their eligibility increased over 10 years between 1995 and 2004 until they reached the same qualifying age. In 2009, the Rudd government lifted it to 67, to be phased in from 2015 with six-month increases every two years, starting from 1 July 2017.
Now we’ve arrived, after almost 30 years, at a pension age of 67 but it could have been much higher.
Almost 10 years ago, then-Treasurer, Joe Hockey, announced the pension age would rise to 70 by 2035.
He asserted implausibly it was “highly probable a child born today would live to 150”.
His move followed a report from the National 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 to this, including a campaign led by National Seniors Australia.
“Only someone who’s worked in an office their whole life would think you can work until you’re 70!” was a popular slogan at the time.
In the run-up to the 2019 election, former Prime Minister, Scott Morrison, dropped the change as Liberal policy.
Deputy PM, Michael McCormack, said it was “probably a step too far”.
“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”.
I encourage Professor Shang and his team to read The Age Pension in the 21st Century by 2018 Actuary of the Year, Michael Rice, founder of the company Rice Warner.
He revealed the cost of the Age Pension as a percentage of gross domestic product (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 Intergenerational Report 2002-03 predicted it would grow to 4.6% of GDP by 2042.
But it was just 2.7% of GDP five years ago, and Rice Warner claimed the downward trend would continue with the projected expenditure to fall to 2.5% of GDP by 2038.
It’s predicted to be just 2.1% of GDP by 2060 because superannuation has been delivering, just as Paul Keating predicted.
Compound interest has been adding to the retirement incomes of millions.
National Seniors rejects 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 whether a Canadian-style system, where you can opt to get the pension earlier and get a bit less or opt in a bit later and get a bit more, would provide more flexibility.
Rather than punish pensioners who need to work, the best way to tackle declining workforce 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 rate 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 choose 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 will be a win for the economy, for the pensioners, and 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 done in Canada. Support the Let Pensioners Work campaign here to help increase the income and savings of pensioners and encourage social and emotional benefits from workforce engagement
This article is featured in National Seniors Australia’s quarterly member magazine, Our Generation.
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