Report highlights
CEDA has taken the next step in the pension and superannuation policy debate in response to Australia's ageing population.
When the national age pension was established in 1909, the average life expectancy for males was 56; for females, 60. Only around 4 per cent of Australians were 65 or over. By 2047, Treasury projects this figure will rise to around 25 per cent.
Without appropriate policy reform, the increase in life expectancy, decreasing birth rates and Australia's ageing "baby boomers" will impact the economy. A comprehensive policy package is required to alleviate future fiscal pressures and ensure that all Australians enjoy an adequate standard of living in retirement.
Pensions for Longer Life: Linking Australia's pension age with life expectancy, written by leading actuarial expert Dr David Knox, proposes a gradual rise in the pension age from 65 to 67, between 2015 and 2022, and abandonment of the fixed pension age strategy in favour of a dynamic approach. Age-based superannuation rules should also be reformed and then adjusted in line with these changes.
Australia would retain its safety net to ensure those who could not work because of ill-health would be eligible to receive disability support payments.
Australians live longer and healthier lives. The recommendation to raise the pension age to 67 in view of the increased life expectancy is modest. The nature of work has also changed. The typical worker of 1909 was a labourer; today's typical worker has an office job. Turning 65 isn't what it used to be. The pension age should reflect this, and continue to reflect this.
Raising the pension age is not a radical idea. Other nations, including the United States, the United Kingdom, Germany and Denmark, are already moving their pension age to 67 or 68 without controversy.
The changes proposed by Dr Knox aim to:
- alter the community's focus on the single age of 65;
- erode preconceptions about when workers are "too old" to work;
- continue the encouragement of increased labour force participation rates at older ages;
- save the federal government a possible $800 million a year in pension payments;
- reduce the call on workers' superannuation savings in retirement; and
- improve the long-term sustainability of the Australian retirement income system.
CEDA's view
"Ageing isn't what it used to be," says CEDA Chief Executive Mr David 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."
If the pension age is to change, a gradual change, announced ahead of time, would minimise the impact on Australians already nearing retirement.