How does Australia's retirement system stack up?

The OECD has released a report comparing retirement systems and Australia isn't performing as well as you might think.

Australian retirees versus the world

The OECD has released a report comparing retirement systems and Australia isn't performing as well as you would hope.

According to the 2019 edition of Pensions at a Glance, the relative incomes of those aged over 65 compared to the average incomes of the total population are low at 72 per cent in Australia, compared to the average of 87 per cent across OECD countries. The problem is even worse for those 76 and over, with their relative income at only 64 per cent compared to the total population.

Poverty rates for the elderly are also very high in Australia at 23 per cent, 10 percentage points above the global average.

However, the poverty rate for over 65s has been declining steadily over the last few years, down from 39 per cent in 2007.

Also the poverty depth (which measures how far below the relative poverty line the average income of the poor falls) is relatively low in Australia because the Age Pension, which provides a floor for pensions, is already close to the poverty line.

 


One of the main problems of the Australian retirement system, according to the report, is the discrepancy between self-employed workers and normal wage earners.

As Australia's superannuation system is voluntary, there is a vast discrepancy between the self-employed and regular wage earners.

"The self-employed tend to be solely reliant on the Age Pension, giving them a lower  replacement rate at retirement compared to employees," the report explains.

Over three-quarters of the older Australian population (65-plus) benefits from the safety net (Age Pension) compared to roughly one-quarter on average for OECD countries. However, almost 38 per cent of all recipients in Australia have their Age Pension benefit reduced by the means test.

Despite Australian treasurer Josh Frydenerg's assertion that Australia's ageing population is a ticking timebomb, the report finds that Australia is a lot better placed than many other nations.

Australia is, in fact, ageing more slowly than the OECD average.

"Given the relatively limited involvement of the government in pensions and the slower ageing process, there is less of an issue of public finance pressure than in many other OECD countries," the report explains. 

"Public expenditure on pensions is projected to remain well below half of that of the OECD average.

"The superannuation system being defined contribution is not subject to financial sustainability issues and, as it will reach full maturity, fewer individuals will be reliant on the Age Pension safety-net."

Do you think this OECD report makes a mockery of Josh Frydenberg telling older Australians that they need to work longer?

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COMMENTS

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4b2
29th Nov 2019
10:17am
For too long Commonwealth Governments of all stripes have had a poor outlook with dealing with the aging population and pensions in general. The aging population is not a new development, governments who boast to be best and brightest for their respective roles should have been planning and putting in place measures to ensure the aging population were taken care of regardless of their financial status at retirement. If they had not put on hold the compulsory superannuation contributions and spread the Future fund to all pensions we may not be talking about this issue. They only think ahead to the next election and theirt own pensions.
The Care Bear.
3rd Dec 2019
5:07pm
It's interesting you say that the aging population is not a new development. I agree, but as it has been obvious for some 60 years or more, why rely on Govt's to fix the problem.
Why haven't the population ensured they are prepared for retirement?
Mariner
29th Nov 2019
10:40am
In some of the OECD countries the age pension is added to the superannuation pension and not means tested but income taxed with all the other income. Here with a healthy super account the age pension falls away. In my old place my retiring mates got about 90% of their previous earnings, and of course they are paying income tax to the grave. Those in dire need will have to rely on top up payments called welfare, and those are strictly supervised - no high end TVs, no motor vehicles, very basic accommodation etc. I do not know of anyone in that situation and I have visited Europe every year for the last 20.
MICK
29th Nov 2019
11:20am
Frydenburg is no different to most of this government's MPs. They're blatant deceitful liars seeking to enrich the already wealthy and get average and poor citizens to pay for it.
We normally see our government sponsored trolls telling us how well we are off but this article is the next of many cropping up which give the facts. Retirees are targets and marked for asset stripping. Retirees are NOT well off when compared to the rest of the OECD.
Mariner
29th Nov 2019
11:26am
Thanks Mick, you seem to know the pension systems in the OECD. One thing has to be said is that free access to medical facilities is never mentioned and those are not available in a lot of overseas places. The money is better in Europe but the concession card is missing. A reason for granting the card to many SFRs who do not make all that much more than full age pensioners.
MICK
29th Nov 2019
12:53pm
Your knowledge is superior to mine here Mariner. Whilst I understand America offers virtually no health care to its retirees unless you pay for it at the least ALL citizens have to take a pension when they reach retirement age.
Canada has a free system as does Great Britain. Not sure about the rest of Europe but likely eastern bloc countries may differ.
The Care Bear.
3rd Dec 2019
5:17pm
In Canada Medicare is different in every province. It’s tough to know if something that Quebec covers would be covered by Ontario without doing some research. For example, one province may have coverage for vision care services, while another may not.

People in the United States often express their frustration about not having a proper healthcare plan for all US citizens. They look at what Canadians have and assume that everything is covered in Canada, but that’s simply not the case. While the healthcare coverage is markedly better than Americans to the south have, it’s far from perfect.

The gap between what is and isn’t covered by Medicare is large enough that many Canadians need private health insurance as well.
Captain
29th Nov 2019
11:37am
As I have said here before, successive governments in Australia have told us they cannot afford to pay the pension. Now it appears other bodies think the Australian government is telling us lies!!

It depends on how the government phrases the question to their departments regarding population growth and ageing. As I showed here last week the average population growth in Australia was 200,000 between the years of 1946 and 1964. From 1980 to 2005 the average population growth was approx 300,000 per year. I was not a mathematical whiz as a young boy, but the above figures (Bureau of Stats figures) tell me there is a large difference between 200,000 and 300,000.

Give all over the age of 65 a pension, providing they have paid tax in Australia for at least 15 years, are Australian citizens and tax earnings above that figure at current tax rates.
MICK
29th Nov 2019
12:56pm
If we cannot be afforded then how can the government we had to have afford to give tax cuts, much of it going to the top end, to the tune of $180 billion? That does not add up.
Of course we are being lied to. The game is deny, lie and do as they like. This government is a master of deception and betrayal. Those who voted for this lot on a media propaganda campaign need to enjoy what we are all about to get. The game's a long way from over.
GeorgeM
1st Dec 2019
12:13am
That's right, Captain, the article comment "Public expenditure on pensions is projected to remain well below half of that of the OECD average." clearly exposes the lies from the Govt as well as it's bureaucrats. I fully agree with your 2nd comment about pension for all as the only sensible way to go.
mogo51
29th Nov 2019
11:46am
4b2, l think you have made a very relevant comment. It's all about them. Plus keeping the poor or aged pensioners poorer.
MICK
29th Nov 2019
12:57pm
Where do people think tax cuts for the wealthy are coming from???
VeryCaringBigBear
29th Nov 2019
3:36pm
The wealthy Mick who else?
Intellego
29th Nov 2019
4:42pm
BB, the tax cuts for the wealthy are coming from things like monies previously allocated to the NDIS, as well as from other services to the poor and needy. Get your head out of your fundament!
MICK
29th Nov 2019
6:07pm
The wealthy have ways and means of avoiding their rightful taxes BB. But they certainly do not avoid tax cuts and have a government ready to dole out money to them.
Who's paying? Mostly average citizens who are having huge sums of money ripped out of services they need. Of course retirees are also targets and we have a government working on refusing to pay a pension until retirees sell up most of what they own and live on it.
I hope I'm wrong but nothing I've seen over the past 6 years points in that direction.
mikecrook
29th Nov 2019
12:19pm
Sadly, we have a government which is very good at looking after those who are quite capable of looking after themselves, while those on the bottom rung of the ladder miss out. 35 percent of age pensioners living in poverty is not a good look, but more seriously 17.3 percent of children living below the poverty line means that there are about 300,000 Australian children who are not guaranteed a meal today, and who will never be able to enjoy the advantages the rest of us enjoy. Why have we written them off as worthless and why does a supposedly Christian based government continue to wage war on the poor.
BrianP
29th Nov 2019
12:34pm
This treasurer is a con-artist.

There is a lot going on we are not told about by this government. Not in a good way either. Too much is being done badly such as selling off our land and business to overseas interests. The damage to Australian businesses and jobs is devastating.

Much bad policy is being done against Australian peoples' best interests. Older age and vulnerable low income people are being given less attention and help than they deserve.

We need better and more trustworthy leaders.
MICK
29th Nov 2019
1:00pm
What we need is laws to stop the right wing media putting ITS GOVERNMENT into office most of the the time. If the right wing media were threatened with closure the game would end.
The second part to this spiel would be to stop ALL electoral funding. The wealthy and their business interests do not give funding to political parties because they like them. Its actually corruption at work.
Mad as Hell
29th Nov 2019
1:25pm
Remember the “budget emergency” ?
Which other demographic apart from part pensioners have contributed to the “budget emergency” since ?
This article just shows that the 2017 changes to the Pensioner Assets Test which was orchestrated by Scott Morrison was theft of part pensioners assets.
No I don’t trust Josh Frydenberg, the LNP, Greens, ALP or others to look out for pensioners or the needy.
Captain
29th Nov 2019
3:11pm
MaH, I am sure the 93,000 people who lost their pension completely and the 372,000 people who lost part of their pensions remember the "budget emergency" we had to have.

Our current crop of politicans (all of them no matter which party) are all the lowest of the low in the human being stakes. They are interested in lining their own , and the pockets of their mates and the rest can hang. In all my life I don't think I have come across so many self interested, self absorbed cretins in one place. Not one of them is worth a cupful of cold water.

Universal pension for all. Keep the faith.
GeorgeM
1st Dec 2019
12:14am
Agree with both 100%.
VeryCaringBigBear
29th Nov 2019
3:14pm
Problem with Australia is that it is simply not worth having super and other assets when you retire unless you have well over $2 million. Better to give it to your family, buy more expensive house, travel the world in the 5 to 10 years before retirement age and then you can have the taxpayers support you at a much higher standard of living than you yourself can on under $2 million.
Intellego
29th Nov 2019
4:45pm
Clearly you are "Very Caring" only about yourself and the well-off.
MICK
29th Nov 2019
6:08pm
Sadly you are correct VCB. Its the game at hand. What some people will do to get their rightful pension. It should not be so.
Intellego
29th Nov 2019
4:38pm
This poor situation is precisely what one would expect under the bungling and moronic Lieberal-Nazional Peabrains currently governing from Canberra.
marls
29th Nov 2019
6:04pm
My mother is on a pension overseas there’s no means test my Aunty and uncle are pensioners in Germany very well oif. My cousin returned to Australia after her husband died in Italy she was 42 she returned to aust her home with family that was 20 yrs ago she left melb 2 yrs ago to live on a Greek island she’s on an Italian widows pension and can live anywhere she wants no means test lives extremely well
MICK
29th Nov 2019
6:11pm
You are relating the viciousness of our system where getting a pension is now up for discussion as the current government pulls out all stops to deny it.
You hear very little about other pension systems. There's no need to attack retirees but that's the game which has been playing for the past 6 years.
Mariner
30th Nov 2019
7:09am
marls - all my family lives in Switzerland, my sisters have universal pensions and can live anywhere in the world they chose to with no sanctions or restrictions. Even I still get a part pension from there for the years I lived there. All I need to do is once a year get a stamp from the local GP that I am still above ground. The system works very much the same as the German one. Most of the pensioners of course are not home owners because it is not so important over there because you can live in a rental for 25 years or more (companies own the real estate). People over there are amazed at our stingy attitude to our oldies.
Jema
29th Nov 2019
6:28pm
It would be interesting to compare criteria between these 2 reports
https://www.forbes.com/sites/niallmccarthy/2015/12/02/which-countries-have-the-highest-levels-of-poverty-for-pensioners-infographic/#42e5f6d7216f
And if updates since 2015...
Jema
29th Nov 2019
6:30pm
Australia at 35.5% retirees relative poverty.
cupoftea
29th Nov 2019
6:48pm
spend spend spend
BillF2
30th Nov 2019
6:33pm
Treasurer, Josh Frydenberg's statement that 'ageing Australians are a ticking time-bomb' is just another example of political misinformation, intended to divide young and old in Australia. He studiously avoids mentioning that most of the money spent on pensions gets re-circulated in society through the continuing need to purchase goods and services. And then that money gets taxed again either directly as GST or indirectly as income tax, paid by tradespeople and other workers. What Josh will not admit, is that he is a hopeless treasurer and the government is looking for more money to cover its ineptitude. If he cannot find new sources of income - more workers in the workforce, that is - then he is going to take it out of the pensioners. Hence, the divide and conquer rhetoric.
No wonder Australia doesn't compare well with the rest of the world.
Oldchick
2nd Dec 2019
4:31pm
You’re absolutely right BillF2. Frydenberg and his statement about getting older people to work shows how out of touch he is. Most employers don’t want oldies because for one thing they can become a medical liability on their business. The young ones also think that once you’ve gone past 60 you don’t have a working brain, yet they’re the generations who can’t spell or add up. Certainly this Government can’t because economically we’re going backwards. That wonderful budget surplus isn’t looking so good now. He could employ a few more people at Centrelink. 2 1/2 hours on the phone today before I managed to speak to a real person, the same a couple of weeks ago.
Blossom
30th Nov 2019
8:59pm
Considering the high increase in the cost of living I can understand why some people are really struggling. e.g. for those who have to have lactose free milk etc for medical reasons (some continuously vomit continuously and some stop breathing if they have ordinary dairy at all) their Lactose Free Milk recently jumped 0.45 per litre. Some are even more expensive. In less than 6 months sliced Deli Ham (that one is the cheapest) has gone up $1.50 kg. From the meat section some pork suitable for roasting is cheaper than beef or lamb. When others aren't on special chicken is usually cheaper. Basic groceries don't go up 0.05 any more.
Farside
30th Nov 2019
11:18pm
There are good reasons for increased prices so managing the food budget will require some careful choices and even dietary changes.

Cheap ham is imported and will continue to increase in price unless the currency does something unexpected. African swine fever has killed a quarter of the world's pig population and is set to create a global meat shortage in 2020. This will flow onto increases in alternative meat products.

Dairy will increase due to reduced local consumption and global prices for dairy products.
Blossom
30th Nov 2019
8:59pm
Considering the high increase in the cost of living I can understand why some people are really struggling. e.g. for those who have to have lactose free milk etc for medical reasons (some continuously vomit continuously and some stop breathing if they have ordinary dairy at all) their Lactose Free Milk recently jumped 0.45 per litre. Some are even more expensive. In less than 6 months sliced Deli Ham (that one is the cheapest) has gone up $1.50 kg. From the meat section some pork suitable for roasting is cheaper than beef or lamb. When others aren't on special chicken is usually cheaper. Basic groceries don't go up 0.05 any more.
Blossom
30th Nov 2019
9:05pm
When I say basic food I mean things such as flour and other items to use to cook from scratch. Generic brand bread recently went up 0.10 a loaf. Generic brand bread is made by one of our major bread manufacturers. I have seen the company representatives (in their uniforms with company label and ID tags) stacking it on the shelves. That has been the procedure for at least 40 years. All generic brands of goods (food and non-food) are all made by major companies. Most have supermarket brands on them.
Blossom
30th Nov 2019
9:05pm
When I say basic food I mean things such as flour and other items to use to cook from scratch. Generic brand bread recently went up 0.10 a loaf. Generic brand bread is made by one of our major bread manufacturers. I have seen the company representatives (in their uniforms with company label and ID tags) stacking it on the shelves. That has been the procedure for at least 40 years. All generic brands of goods (food and non-food) are all made by major companies. Most have supermarket brands on them.


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