Influential voices on both sides of the fence have their say.
In Federal Budget 2014, the Government stated that it intended to push out the Age Pension eligibility age from 65 to 70 years. This so-called ‘zombie’ legislation is still on the books. YourLifeChoices asked some of the most influential voices in the public conversation to explain their positions on this proposed policy. This is what they said.
Dan Tehan, Minister for Social Services
The Age Pension has the most generous indexation arrangements and is paid at the highest fortnightly rate of income support payments in the Australian social security system.
Since the Coalition was elected, pensions have increased by around $100 per fortnight for singles and $150 per fortnight for couples. The Australian Government spends $45 billion each year on the Age Pension.
When the Age Pension was introduced over a century ago, the pension age was set 10 years above the average male life expectancy of 55 years. It is now more than 15 years below our more than 80 years’ life expectancy.
In 1975, seven working Australians supported each Australian retiree. This has fallen to five working Australians today. In 2055, this will drop to three working Australians.
The simple fact is, Australians are living longer and we need to ensure that Australia’s social security system remains sustainable for future generations.
Elayne Grace, chief executive, Actuaries Institute, Australia
As average life expectancies continue to increase, it is inevitable that the eligibility ages for government-funded pensions will come under pressure. To keep the cost of these taxpayer-funded pensions relatively constant as a percentage of gross domestic product, and affordable over time, the future eligibility age should be linked to life expectancies.
As an example, for every year increase in life expectancy, there should be a proportional increase in pension age. This link is already happening in some European countries. It occurs automatically, with appropriate transition arrangements and plenty of early warning.
An important aspect of gradually raising the pension age is that it changes the mindset and expectations of our community. But we need to do it in a sensible and compassionate way with no sudden increase.
We must also recognise the need for appropriate income support for those whose bodies are ‘worn out’ because not everyone will make the stipulated age in good health. However, this issue arises whatever the age, whether it is 65, 67 or 70. Will this simply push more retirees onto disability pensions for a year or two before they transition to the Age Pension? This could mean that higher disability pension costs will partially offset the reduced Age Pension costs.
There are some critical questions to consider. How willing are employers to employ a 66-year-old (for four years to age 70) either on a part or full-time basis and if they are, will it be at the expense of younger workers?
Emma Dawson, executive director, Per Capita
Obviously, lifting the pension age to 70 brings economic savings to the Government. At the same time, keeping experienced older workers in the labour force can increase productivity and support economic growth.
For citizens, however, retiring at 70 would bring significant problems.
It’s true that, for many people, continuing to work beyond the traditional retirement age of 65 brings real benefits. Many older people wish to stay engaged and active at work, although work for this group may need to look a little different, with part-time and flexible positions essential possibilities.
We must also recognise that working into an eighth decade is not possible for some people. Those employed in jobs requiring a high degree of manual or physical labour often find the demands of the job become too much as they get older. Working until 70 simply isn’t an option for them, and changing to a new occupation can be notoriously difficult for older people.
At the same time, older people face significant barriers to workforce participation, including ageism and health issues.
Through our research and social innovation work at the Centre for Applied Policy in Positive Ageing, we know that a worker made redundant in his or her 50s or 60s finds it much harder to re-enter the workforce.
Many such citizens are already struggling to survive on Newstart while they wait to reach the retirement age and access the Age Pension. Lifting the pension age to 70 will add five more years to the wait for such citizens and drastically increase the likelihood they will enter retirement in poverty.
Those able to do so will be forced to significantly deplete their superannuation savings while waiting to access a part-pension, meaning there will likely be more full-rate pensioners at 70 as a result.
While supporting older people to continue to work when they are willing and able to do so is an important policy goal, enforcing a mandatory pension age of 70 is neither fair nor reasonable for all Australians.
John Daley, chief executive, Grattan Institute
We estimate that increasing the pension age by three years to age 70, and lifting the preservation age to 70, would increase total workplace participation rates by an additional 1.4 per cent, increasing economic growth by around $25 billion.
Obviously, reforms would need to be designed to ensure that those over 55 who cannot work due to disability are able to access a pension equivalent to the Age Pension and have unfettered access to their superannuation.
Increasing the workforce participation rate of older people would mean that Australia’s GDP would be about $25 billion higher by 2022. The key policy change is to increase the ages at which people become eligible for the Age Pension and eligible to access their superannuation.
In 2017, the pension age increased to 65.5, and continues to increase by six months every two years until, in 2023, it reaches 67.
These changes are in the right direction, but they missed an opportunity for much more substantial reform, and by setting long-term timetables for change, may have made future change more difficult.
(Under) the current regime, people can retire at any age after 55 and live on their superannuation and savings until they qualify for the Age Pension. A later pension age would effectively encourage many to work for longer, even if they formally retire before the pension age.
Scott Connolly, assistant secretary, ACTU
Increasing the pension age is yet another example of the rules being broken for working people and the Turnbull Government being out of touch.
At a time when working people are struggling against near-record low wage growth and are already being forced to work longer hours for less pay, the Turnbull Government proposes to force people to work until they’re 70.
A dignified retirement is a goal that is slipping away from more working people as they face stolen wages and superannuation, and a persistent gender pay-gap which is compounded in retirement. Women on average retire with 47 per cent of the balance of men, and this causes huge numbers of women to retire into poverty.
The reality is that despite wages flat-lining, corporate profit growth is incredibly strong. We need to share the wealth that is being created by Australian workers, not force them to work longer to prop up the absurd salaries being handed out to the top end of town.
More money and power in the hands of working people would mean better pay and conditions, more money being spent in Australian businesses and a stronger economy. It would mean that Australian workers would be able to enjoy a dignified retirement, which was the promise of the superannuation system at its inception.
In America, people in their 70s work in hospitality and retail, rather than enjoy their retirement. We will not accept the further Americanisation of our industrial landscape, and we will not accept working people shouldering an unfair burden when the big banks and multinational corporations are being given an $80 billion tax cut.
What is your view on making 70 the official retirement age? Does it leave too little time to enjoy retirement in good health?