Lifting preservation age not such a super idea

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You’ve heard that we’re living longer? Or that we need more money in the super stash to enjoy a comfortable lifestyle? So does the periodic debate about lifting the superannuation preservation age get under your skin? A review by a superannuation law expert offers some ammunition.

Currently, Australians are able to access their super as early as 55 for anyone born before 1 July 1960, progressively extending to 60 for those born on or after 1 July 1964.

Would the economy benefit from keeping older Australians in the workforce for longer as a result of raising the super access age?

The short answer is “unlikely”, according to Deakin Law School superannuation law expert Dr Rami Hanegbi.

He says lifting the super access age was not likely to return economic or social benefits. In fact, he believes it would have a negative effect.

Dr Hanegbi, who researches tax and superannuation law and policy at the Melbourne-based university, recently reviewed the pros and cons of raising the access age.

In his findings, he says: “Laws that raise the access age to above 60, and have the effect of leaving many workers in a position where they have no viable choice but to continue to work, are a policy change likely to have significant consequences.

“For example, there are those who are constrained from working longer due to the physically demanding nature of their work – such as bricklayers.

“However, even those working in industries not requiring large amounts of physical exertion will, in many cases, be disadvantaged from such a policy move.

“While this course could bring some economic benefits, these are likely to be limited. This will be the case whether future labour markets are tight or slack, though in the latter case the benefits will be even more limited.”

Dr Hanegbi says that it is almost certain that a lift in the super access age rules would substantially negatively impact many people.

“Specifically, while it is true that life expectancies have risen, the rise in ‘healthy life years’ has been materially less dramatic,” he says.

“As a result, raising the superannuation access age from say 60 to 65 would dramatically reduce the percentage of one’s life spent in the ‘golden years of retirement’ where one is both retired and in good health.

“The negative impacts of such a policy on people’s right to self-determination, as well as on widespread confidence in the superannuation system, are also important consequences on legislating such a policy.”

Dr Hanegbi says policies that would have a marked effect on people’s lives should be based on solid evidence showing they were “welfare-enhancing”.

“Such evidence appears to be lacking in the case of raising the superannuation access age,” he says.

“Compulsory superannuation has been a part of the retirement landscape in Australia for more than 20 years, with the availability of retirement funds having a marked affect not only on taxpayers but also on their families and other members of the community.

“The consequences of making changes, therefore, need to be carefully considered.”

Dr Hanegbi’s paper, Should the Superannuation Access Age Be Raised?, was published in the journal, Australian Tax Reform.

Are you concerned about the possibility of having to work longer before being able to access your super?

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Written by Janelle Ward

42 Comments

Total Comments: 42
  1. 0
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    Another good reason not to invest in super.

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      Most of us had no option – join the company super fund or else. But in those days you took your super in a lump sum, paid off your mortgage and got on the age pension which in those days was not
      welfare. Never really could understand why women retired at 60 and blokes at 65 and most women then outlived their blokes by many
      years.

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      It was because women had the choice to pay a bit extra each fortnight and go early but men didn’t. They paid the same just for a shorter time frame.

      Anyone can retire whenever they have enough money coming in to not have to go work for a boss. There is no law that says you have to go to work.

    • 0
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      Old Geezer, what a stupid, inane, unintelligent comment! Who is your financial advisor – he/she needs to be disbarred!

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      Big Al I am not a fan or super and never have been. To me super has too many restrictions and is exposed sovereign risk. I do have a small portion of my wealth in a SMSF that I manage myself but that is a risk I am comfortable with at present. However I will not be as comfortable if Labor wants to steal my franking credits from my super so I will have to make changes if that happens.

      I prefer to have my money invested outside super where I control it and I don’t have to invest it with restrictions. I also have access to it whenever I want at any age.

      I don’t use financial advisors for the very good reason that they are company people who act in the interest of the company they work for which may or may not be in the interests of their clients.

      I do have a super expert now that handles my super paperwork and checks that everything complies etc but for many years I did it all myself.

      Super is no longer a good investment at all.

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      Old Geezer – read your message again and you do make a lot of sense for younger people, especially about access to their money and all those restrictions and the sovereign risk (Shorten attack). So think twice about putting money in; I don’t think the show is running the way Keating and Costello intended at the time.

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      Big Al, I would have thought this is right up there with his most intelligent comment.

      OG, just for your information I signed up for super on day one of starting work with the intention of retiring at 55. Without doing anything beyond some salary sacrifice in the latter years. I have been a SFR for 10years now and I have now more than when I retired, without fooling around with all the tax dodging.I pay my tax as this is my contribution to the future generation. You look like a sad greedy grumpy old man.
      I feel sorry for you!!!

  2. 0
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    I would have been more than happy to work for longer, and access a better income. However, two factors prevented this. Being made redundant at 57, I tried to secure other work (I am a qualified Social Worker) but unsuccessfully. I believe my age was a big factor. If we are to work longer, ageism needs to be addressed. Then my partner was diagnosed with a terminal illness so I spent the next five years caring for him till he died. I have never had a job since, despite my qualifications and experience. So will be a drain on the economy as I access the Age Pension until my demise.

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      Well said Patti. I am also concerned that we only consider hard physical work as a deterrent to working longer. What about dementia, lack of empathy and inability to change with a changing work environment as we age. Not necessarily talking about this at 57 though!

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    Superannuation has not been allowed to run its full course of 50 years. It has constantly been fiddled with and rules and regulations changed.
    For heavens sake leave it alone so it can grow an income for the workers on retirement.
    There is no way that superannuation can possibly work and provide an income in retirement under those conditions.
    Working people should not be constantly told to put more and more money into superannuation to make up the shortfall or they will have no income in retirement.
    What needs to happen is to leave the workers money in the fund to grow and increase without the constant rise in “management and various other fees”, and to restrict the use of those funds by the super managements for advertising etc.
    All of the excessive ‘usages’ of the money invested decrease the amount each worker who has invested in the fund(s) can expect to have available in retirement.

    • 0
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      Good point AutumnOz – the universal pension funds often referred to in these pages started about 70 years ago in Europe and in my case membership was compulsory, I started paying in 5% and my employer 12% (50 years ago). Of course that fell away when I left the country to come here. The fund is not taken as a Govt-owned entity and keeps
      growing. The reason it is still going despite us all getting older there is never a residue after the person dies. So people pay in till they are 60 but die before 65, so never get a cent. However, people like my Mum getting their pension all the way to the grave. But there will never be anything for the kids, unlike our super which is also an investment vehicle. So leave the super alone and only use it for the workers concerned not their heirs, and then we should always have sufficient funds available.

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      One of the issues I see with that plan, Cowboy Jim, is that in Australia we encouraged extra private contributions. I certainly wouldn’t use super as a savings vehicle – which many have done – if the benefit extended to others and not to my heirs. This is one of the issues I have with the current attitude among politicians (and others) that super is to spend in retirement instead of drawing a pension. My super is 100% personal savings. There was NO employer contribution ever and nothing came out of wages or salary. A few years ago, a financial adviser told me I would be better off putting all my savings into super and devised a schedule for doing that. But every cent was discretionary personal savings. I resent the suggestion that those savings should benefit other workers – who didn’t save, though vast numbers of them could have far more easily than I – rather than my own children. And I resent the fact that because I saved, I can’t access benefits given to people who were far better off than I was during their working life but chose to spend on a much more lavish lifestyle.

      If we structured our superannuation system as exclusively a compulsory retirement funding system, your suggested approach would be reasonable. But we’d have to make some big changes.

  4. 0
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    This article misses one salient point; retirement is not a “one size fits all” scenario. Some people have been able to retire in their late 50’s due to a range of factors. Some had superannuation from the time they first started working, some had investment properties, some dabbled in the Share market, some had legacies from rich relations and some won the lottery.

    The rest of the population may need to continue working to become more financially stable to try and have a comfortable retirement. Sadly, there will always be a small number who through overspending, illness, messy divorces or other factors who will reach retirement age with the clothes they stand up in. The designers of these schemes that play around with retirement ages, change taxation systems around super and set the fee structures are never named nor are their circumstances brought to light. I’m betting that these nameless, faceless people are senior enough in the Public Service to never have to worry about an age pension as their super will allow them to retire and still live in the manner to which they have become accustomed.

  5. 0
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    It is far cheaper for the government to be paying a pension to older people than unemployment benefit to young people with families to provide for. Free up the jobs for the young and let the ‘oldies’ enjoy some golden years before their health deteriorates!! I have been retired for five years now, volunteering at an aged persons facility and caring for my grandchildren in the school holidays; still being helpful and productive despite being out of paid employment. Where would the government be without all the older volunteers in the community?

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      Unfortunately many volunteers are treated like SFRs. They are milked dry and then abused by others. I got sick of people saying he is only a volunteer and knows nothing which makes volunteers feel so worthless. So after trying a few different volunteer roles with same outcome that’s it for me.

    • 0
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      when are the government going to realise that if they were to line all us oldies up against the wall and shoot us, problem solved. Not the pollies though, let them have there entitlements.

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      OG, the problem you write of has two possible reasons. You volunteered with the wrong group or you should look in a mirror to find the second reason. We have volunteered for the past 10 years and have always been appreciated for our work. We don’t do it for the praise but it’s nice when it comes.

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      I simply don’t do it any more as I am sick of being abused. Many others have had the same problems.

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      Shock! Yes OG you are right. I blame Centrelink rules which allow older people to volunteer 15 hours a week. Many organisations are now taking advantage and treating volunteers as unpaid workers. It’s changed the whole structure esp for volunteers in the Big Organisations. A friend was recently told she had to buy a TShirt with the organisations logo if she wanted to continue volunteering.

  6. 0
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    Unlike in decades past, 55 is no age these days. Unless you are self made and can support yourself from independent means, few would be in a position to retire at such a young age. Good luck to those that can. And just for the record there is no mandated retirement age in Australia. You never have to work a day if you can support yourself. The age is only relevant for very limited reasons: being clergy or a judge have mandatory retirement age of 70, another is applying for a Government age pension 65 and the other is accessing superannuation 55(in some cases),

    Given that superannuation is amassed during working life, then meant to fund retirement (and not a windfall to spend on toys and trips) being able to access this early is ridiculous. Those that do so ( with the exception of the sick and injured) and who have no other savings,are clearly expecting to rely on a Government pension a little way down the track. This defeats to main purpose of super in the first place.
    I have no problem with raising access age to super inline with the pension application age. And I have no objection to that age being raised either as long as all other legislation related to employment such as insurance, workers comp, etc are also raised accordingly.
    There will always be people in a position to retire early and I’d suggest most that do do so without their superannuation but with other sources of income. Good luck to them they have earned that right. The rest of us will have to work and save to look after ourselves.

    • 0
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      People will still leave work early, go on a spending spree and then be able to access their super under hardship.

      I know of a fellow in his early 30s who had a substantial super balance as he had high paid jobs but had a mortgage on his house. He left his job travelled overseas and told his bank when he got back he couldn’t get a job and was having trouble paying his mortgage. His bank organised for all his super to be refunded and paid off against his house. He has since got an even higher paying job than he had previously.

    • 0
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      You never have to work it seems as in Australia you can access the dole when you finish school – not like that in other jurisdictions! I know people here who have never worked but still do OK and they certainly do not have their own finance either. If you have no pride it’s rather easy, even the Salvos throw money and groceries at you.

    • 0
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      You can’t access the dole (Newstart) until you are 22 now. You can access Youth Allowance when you leave school provided your parents are low income earners or on welfare. Otherwise your parents have to support you unless you can get a job until you are 22. So what happens kids leave school have issues with their parents and leave home end up on the streets as drug addicts.

  7. 0
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    Why do hypocrite politicians get to decide when the rest of the population can access their super but don’t restrict access to their own super. Another double standard by these greedy parasites .

  8. 0
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    The conundrum with super, as I see it, is that if you haven’t got quite enough to be a SFR, then there is a massive incentive to spend up big in your early years of retirement, to run your asset base down, and maximize your OAP payments. I am sure this was not an intended outcome – starting from Keating and through the Costello years, but that is the outcome of what the present rules has delivered. There must be a better way.

    • 0
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      I’d be more precise and say that if haven’t got millions there is a massive incentive to retire early and spend up big so you do get the pension when you retire.

      Just get a home improvement loan, then retire and spend up big using your home equity if you can’t access your super. You can then plead hardship or just wait until you can access your super and then it all go in paying your home improvement loan.

    • 0
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      Absolutely Big Al – SFRs must be looking into their mirrors these days and see prize mugs looking back at them. Told my super fund manager exactly that 5 years ago when I closed my fund; he offered
      annuities. You only live once according to James Bond.

    • 0
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      Keating could not have seen the GFC hitting and Central Banks flooding the world with cheap debt. When bonds were paying 10% or 12% we didn’t have a problem. Now 30 countries have negative interest rates. The biggest sharemarket bull run is just about over and property returns yield around 2% and prices paid falling.

      Saving and investing is not so rosy now.

      Superannuation once returned a reasonable income better than the OAP but that is just not happening now.

    • 0
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      Big Al, there is a better way and I did it, I got my TPD payout when I was 55,I left it in super. Because I was over 55 I could draw down on it every year, I took $200 a week. About $10,000 a year, I was single and living on a dsp pluss $200 a week. It has lasted me 12 years so far and I still have 10s of thousands left.
      Yes you should be able to draw on your super, but only a %of it every year. Any one that spends it all is bloody crazy. Remember its the amount of money you have while still alive that counts, as long as you have enough its ok.once your dead I dough it will matter that much what you have.

    • 0
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      Yes, we have bat-eyed fools in Canberra who can’t see that flogging SFRs just pushes more and more to divest and go on the pension. They would be better off supporting people to be as financially independent as they are able. This is why the assets test change was STUPID. It just created a massive incentive for people to avoid having savings unless they are rich enough to generate a very high income. Most struggling SFRs would now be far better off with half their wealth. What an idiotic way to run a country! And now Shorten wants to finish the job of demolishing self-funded retirement for all but the very rich. And somehow that’s supposed to help the federal budget – pushing retirees onto the pension? It’s just DUMB.

  9. 0
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    Thanks OG .A very small consolation by them

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      That fellow whose bank organised his super to pay his mortgage will probably sue the bank when he retirees as he was robbed of the ability to earn enough super for his retirement.

  10. 0
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    The government should be ashamed of itself as many older people don’t even make it past 68.
    This means that after working and paying tax for over 50 years in some cases, there is no retirement for some at all.
    You can however be sure there will be inheritance tax, death tax and every slimy way you can think if to get their hands on your money just to squander it like they they squandered the pension fund that was originally set up to cope with all this.

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