Australia should gradually raise our pension age from 65 to 67, says the latest research report from national economic think-tank CEDA.
The report, Pensions for Longer Life, says rising life expectancies and the ageing of the population will justify a higher pension age by 2015.
And it says that eventually Australia should link the pension age to life expectancy on an ongoing basis.
The report has been written for CEDA by Dr David Knox, a partner in consulting firm Mercer who was previously the Foundation Professor of Actuarial Studies at the University of Melbourne. It is the latest in a series of CEDA reports and forums urging action on Australia's ageing population, including the major 2004 research collection Australia's Ageing Population.
When the Federal Government created the national age pension in 1909, around four per cent of Australians were 65 or over. But by 2001, around 15 per cent of Australians were 65 or over - and by 2047, the Federal Treasury projects around 25 per cent of Australians will be 65 or over
Rising life expectancy is one factor swelling the ranks of the 65-and-overs. By 2001, a 65-year-old woman could expect to live another 21 years and a 65-year-old man almost 18 years.
CEDA's chief executive, David Byers, says the report is an obvious and sensible response to the fact that most 65-year-olds are no longer near the end of their lives.
"Ageing isn't what it used to be," says Mr Byers. "Turning 65 isn't a huge milestone any more. As Australians live longer and healthier lives, the way they work and prepare for retirement will also change."
"We need to alter the preconception about when you are 'too old' to work. You can still be highly productive at 65. Many of our most eminent Australians are making valuable contributions well after they turn 65.
"The fact is that Australia needs to encourage more people to stay in the workforce to maintain its economic growth into the middle of this century."
Mr Byers notes that other nations, including the United States, the United Kingdom, Germany and Denmark, are already moving their pension age to 67 or 68. Iceland and Norway, two of the world's most prosperous countries, already wait until 67 to confer the age pension.
"There hasn't been huge controversy about a higher pension age in any of these countries," he says.
The report notes that Australia would retain a safety net for those between 65 and 67 - the disability support pension - for those who cannot work because of ill-health.
In the report, Dr Knox suggests gradually moving the pension age up by two years to 67 between 2015 and 2022. He points out that Australia is already changing the female pension age from 60 to 65, a process that started in 1995 and will finish in 2014.
Changing the pension age by two years could save $800 million of tax money, the report estimates, while at the same time providing workers with better superannuation incomes after they reach the pension age.
The report says a gradual change, announced ahead of time, will minimise the impact on Australians already nearing retirement.
Dr Knox also suggests reforming age-based superannuation rules in line with the pension age changes.
CEDA Information Paper 89, Pensions for Longer Life: Linking Australia's pension age with life expectancy, is written by Dr David Knox. Dr Knox was the first Professor of Actuarial Studies and director of the Centre of Actuarial Studies at the University of Melbourne, and was also deputy dean of the Faculty of Economics and Commerce there. He was president of the Institute of Actuaries of Australia in 2000.
More details of Pensions for Longer Life can be found at the CEDA Web site.
For further information please contact:
John Harris
Corporate Relations Director
Phone 03 9652 8415
Email info@ceda.com.au
Printed from the CEDA Web site at http://ceda.com.au. Copyright 1999-2009 CEDA