Should you have to work until 70?

As YourLifeChoices reported from the Budget Media Lock Up almost three weeks ago, there is one measure of zombie legislation that the Government has chosen not to dump – and it’s one that concerns all of us.

Discussion on raising the Age Pension qualifying age to 70 had gone relatively quiet. But this measure survived the dump of zombie legislation announced as part of Budget 2017. This is largely due to the fact that the Government still believes it can pass this measure and because, as it is not due to commence until 2025, it is not included in the four-year Budget forward estimates. However, Parliamentary Budget Officer Phil Bowen confirmed in Thursday’s Senate estimates hearing that the legislation is indeed still on the table.

Announcing the measure prior to his largely unpopular Budget in 2014, then treasurer Joe Hockey said, “What we are going to do is to deliver a fairer system for the aged pension that is going to focus on the sustainability of the system with a reasonable quality of life. The aged pension expenditure today is currently more than we spend on defence.

“It’s rising to $72 billion rapidly, that’s over six per cent growth. One of the reasons why is because we’re ageing … but the pension kicks in currently at 65. When Labor increased it to 67 by 2023 we gave them bipartisan support. When we introduce legislation to increase it to 70 by July 2035,  … we expect that there will be bipartisan support.

“The aged pension needs to be a safety net by 2035, not a cargo net.”

As you can imagine, bipartisan support was not forthcoming and Labor has continually pushed to have the measure scrapped. In February this year when it was apparent that certain zombie measures would be dropped, Shadow Minister for Families and Social Services Jenny Macklin stated, “Labor has strongly opposed the planned increase to the pension age to 70 since it was first proposed in the horror 2014 budget,” she said. “How does Mr Turnbull expect construction workers, nurses and farmers to work until they’re 70? He’s completely out of touch. “The changes unfairly hurt Australians living in regional and remote Australia, where life expectancy is lower.”

However, deputy Prime Minister Barnaby Joyce defended the Government’s stance when asked on ABC’s AM program, also in February if the measure would be dropped. “We have our policy but we are negotiating with the Senate as we always do,” Mr Joyce responded.

Opinion: Working to 70 only half the Age Pension problem

Labor has once again stepped up its push to stop the increase of the Age Pension qualifying age to 70, with an online petition doing the rounds.

The policy, if passed, would mean that all Australians born after 1 January 1966 will have to wait until 70 to claim an Age Pension. Labor claims that this will result in Australia having the oldest pension age in the developed world. While this may be true based on current worldwide pension qualifying ages, it doesn’t account for other countries making a similar move. The USA and Denmark have plans in place to increase the pension qualifying age to 67 and Iceland has had a pension qualifying age of 67 since 1958.

Working to 70 may well be the way of the future, as trends would suggest, however, if the Government expects people to work until 70 before they can claim an Age Pension, then surely they must give those who are physically unable to do so an alternative? Perhaps decent superannuation savings as defined by the Superannuation Guarantee Bill of 1992.

The unions push for a portable superannuation scheme, similar to that which was already afforded to civil servants and the professional classes, actually began in the late 1960s. However, it wasn’t until 1992 that the then Keating government brokered a deal with the unions to forgo annual wage or salary increases to allow for the first employer superannuation guarantee contributions (SGC) to be paid at a rate of 2.5 per cent. The plan was that the SGC would rise to nine per cent and then 15 per cent, ultimately reducing the reliance on the Age Pension as a form of income in retirement.

Keating Government, Treasurer, John Dawkins stated: “The increased self-provision for retirement will permit a higher standard of living in retirement than if we continued to rely on the Age Pension alone. The increased self-provision will also enable future Commonwealth governments to improve the retirement conditions for those Australians who were unable to fund adequately their own retirement incomes.” (Superannuation Guarantee Bill 1992).

Sadly, this hasn’t eventuated as planned. Some 25 years after the Bill was introduced, we are stuck with an SGC of 9.5 per cent. The then Labor Government had planned to increase the SGC from nine per cent in 2013 to 12 per cent by 2019. The increase was subsequently frozen by the Coalition Government in 2014 at 9.5 per cent, where it will stay until June 2021. It will, if not frozen further, increase to 12 per cent by 2025 – still some three per cent short of where it should be.

It is time for the Government to decide whether it really is committed to reducing the reliance on the Age Pension as a form of income in retirement. Simply taking it off those who need, without a Plan B, isn’t good enough.

What do you think? Would you support an increase in the Age Pension qualifying age for those born after 1 January 1966 if the SGC was increased to a sufficient level? Or is it simply ridiculous to ask anyone to work until 70?

Related articles:
Reaching preservation age
Age Pension meaning changes
Working to 70 a pipe dream

Written by Debbie McTaggart

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