The Productivity Commission have warned Australia is on the brink of a collapse in national income if it does not act rapidly to address the pressures of an ageing population – but the Association of Superannuation Funds of Australia (ASFA) countered that any raise to pension age eligibility could push older people onto the disability pension.
In a report released Friday, the government advisory body recommended raising the eligibility for age pensions to 70 in order to avoid a budgetary crisis due to Australia’s ageing population.
Changing the eligibility age of the age pension to 70 years would reap $150 billion in savings over the period from 2025-26 to 2059-60 and increase participation rates among older workers by around 3 to 10%, the Productivity Commission said.
But the suggestion has already met with widespread disapproval.
A spokesperson for Treasurer Joe Hockey said the government had no plans to increase the pension age. Other bodies to condemn the suggestion include The Combined Pensioners and Superannuants Association, National Seniors and workers’ unions.
ASFA said social and health-related factors must be taken into account when considering any further changes to the qualifying age.
"Many people reaching their late 60s and early 70s are either unable to work at all, or can no longer perform the roles they have been working in, due to physical or mental health-related concerns,” ASFA CEO Pauline Vamos said.
“While retraining these workers is good in theory, the reality is a lack of jobs for older workers would most likely see many individuals in this age group forced to apply for the Newstart Allowance in order to survive.”
No decision to further increase the eligibility age for the Age Pension should be taken for another decade, when it will be clearer what the job prospects and health status of older workers is, she said.
An increase could also potentially push people in their late sixties onto the disability pension, the cost of which should be taken into account by policy makers, said ASFA.
To decrease future reliance on the pension, ASFA suggested providing job options training for older workers, boosting retirement savings by increasing the Superannuation Guarantee to 12% and maintaining the Low Income Superannuation Contribution, and allowing flexibility in contribution caps to allow people to catch up retirement savings when they can.
One of the only organisations to say the idea must be given consideration is Taxpayers Australia.
“The cost to government of an ageing population is going to go up. This means hard choices such as increased taxation or the cutting back of government programs. One solution is to raise the pension age to 70," says superannuation products and services manager Reece Agland.
Meanwhile, the Financial Services Council favours raising the superannuation preservation age from 60 to 62.
Research conducted by Rice Warner Actuaries for the FSC shows that increasing the time spent in the workforce for every Australian by just one year reduces the superannuation savings gap by $200 billion.
“This significant retirement savings gap makes increasing the labour force participation of older workers in Australia a policy imperative,” FSC director of policy and international markets Martin Codina said.
Productivity Commission forecast:
- Australia's population will grow from about 23 million in 2012 to about 38 million by 2060
- Australia will have 4 million more people aged 75 years or older by 2060, with 25 centenarians for every 100 newborns, compared with one centenarian for every newborn in 2012
- Net national income per capita will grow by 1.1% a year over the next 50 years compared with 2.7% over the past 20 years.
- Average labour productivity growth will stay around 1.5% a year from 2011-12 to 2059-60 – below what many economists believe is required to ensure future sustainable economic growth
- Capital investment required to meet the needs of the expanded and aged population by 2060 is expected to reach $38 trillion, five times more than the previous half century.