Is there a need for Australia to have the highest retirement age in the OECD, ask the SMSF Professionals’ Association of Australia (SPAA).
This would be a consequence of moving to a 70-year-old retirement age, it said.
The SPAA has spoken out in response to Treasurer Joe Hockey’s recent
speech in Washington, where he indicated that the Australian Government will raise the retirement age and crack down on the eligibility for the age pension as part of an urgent effort to trim, cut or scrap unsustainable expenditure.
But SPAA director of technical and professional standards Graeme Colley said simply increasing the retirement age will be no magic bullet.
“Increasing the preservation age beyond the current graduated increase to age 60 by 2024, and potentially aligning it with the age pension age, will mean there will be more pressure on cost of social security,” he said. “An increase in the pension age will mean those in labour intensive jobs whose physical condition is likely to fall behind those in less physical jobs may need to access Newstart, or some other type of social benefit to survive.”
The vast majority of those nearing retirement have only a relatively small amount of super saved for their retirement, and some of the lump sums being paid from many funds for anyone retiring today are so small that using them to start a pension is ludicrous, Colley said.
However looking to the future, it could be expected that younger generations will have access to a larger amount accumulated as a result of superannuation guarantee contributions over most of their working life.
This is expected around 2030 when a person who commenced work at the start of the superannuation guarantee system may be considering retirement, he said.
Self-managed super funds (SMSFs) are also well positioned to meet the adequacy requirement of retirement income policy partially due to the engagement of members who have maintained SMSFs over a reasonable period, and the ability to control their retirement destiny.
The true measurement of the retirement sector and its cost to the government’s bottom line needs to be debated before any rash decisions are made, Colley said, and in light of this we need to ask ourselves if there is a need for Australia to have the highest retirement age in the OECD.
But Pauline Vamos, CEO of Association of Superannuation Funds Australia (ASFA) told Wealth Professional
that such a high retirement age isn’t really as dire as it sounds.
“What makes Australia different is that we have a superannuation system, so most people will retire on a supplement to their age pension – many other countries don’t have that and are in a lot of trouble,” she said.
However Vamos did agree that the implications of a higher retirement age on the workforce need to be thoroughly explored.
Colley argues that whether the superannuation system is sustainable is not the issue – he says the issue is whether the superannuation system is able to be funded so that a person receives an adequate income in retirement.