The truth about retirement

Yesterday’s Productivity Commision Report on superannuation canvasses an increase in the preservation age. But hidden in the report’s detail is the reason why this must not happen.

As reported by Drew yesterday, the top-level statement in the Commission’s report, Superannuation Policy for Post-Retirement, was the suggestion that the preservation age (currently 55, due to move to 60 by 2025) be further increased to 65, thus saving the nation $7 billion per annum. Arguments to move the preservation age include such massive savings and the need to better match the Age Pension entitlement age (currently moving from 65 to 67, with an increase to 70 preferred Abbott Government policy). Another aspect of the report that received a lot of media attention was the confirmation by the Productivity Commission that so-called greedy baby boomers are actually not ‘double dipping’ into their superannuation by withdrawing lump sums to waste on travel, expensive toys and living the high life, then resorting to the Age Pension a few years later. The Commission instead found that most retirees are very careful with their savings, with fewer than one third taking an early lump sum and those doing so usually having only a modest balance, typically less than $50,000.

But while these aspects of superannuation grabbed the headlines, the most important finding of the report was buried in the detail, in Volume 2: Supplementary Papers. And this is the high level of involuntary retirement, with 70 per cent of those who retire when aged 45-49 doing so mainly due to reasons of ill health, and around 35 per cent of those aged 60-69 retiring involuntarily due to health or redundancy.

Read the full report:

Volume one

Volume two

Opinion: Whose money is it?

These statistics reveal the stark truth about retirement; a large whack of people actually did not wish to stop work – they were forced to do so. So when they cannot automatically self-fund their later years this does not mean they are lazy or financially irresponsible. It means they have had less opportunity than others to achieve the necessary level of savings.

So what does this mean for the Productivity Commission’s suggested policy of raising the preservation age? Well the Commission nailed the first possible response, itself, stating, “Changes in preservation age will have little effect on workforce participation.”

And that is patently obvious if more than one third of retirees didn’t want to leave the workforce, but were forced out by ill health or redundancy.

So why would you lift the preservation age? To use a time-honoured colloquialism, I’m b******* if I know!

It will mean those who are forced out of work will need to wait much longer to access their own money. So they will be forced back on welfare, applying for the measly Newstart, which has to be the most inaccurately named ‘benefit’ of all time.  

As the Commission has also noted, “The involuntary retired are frequently less wealthy … and have lower levels of education”, thus confirming everything we have ever suspected about the paralysing grip of lifelong disadvantage.

So what gain is there to be had by changing the preservation age for those who did not retire by choice? None whatsoever, except it MAY save the government billions.

But not as much as tackling the overly generous super tax concessions that mainly favour the wealthy, as we’ve noted before.

The arguments about super are hotting up and the Productivity Commission’s report is very useful to more fully understand the nature of retirement and post-retirement income. But piecemeal suggestions are not policy. They are just more ad-hoc ideas and thought bubbles, no matter how well researched. As the Productivity Commission itself notes, a comprehensive inquiry into the whole field of retirement income is urgently required.

What do you think? Why did you retire? By choice? Or did poor health, carer duties, redundancy or other factors force you out? If you have to wait until 65 to access your super, how will you fund your retirement in the interim?