In a contributed blog exclusively for ifa, Lifespan Financial Planning chief executive Eugene Ardino noted that since the Commonwealth age pension was introduced in Australia in 1909, life expectancy has gone up 25 years for men, to 80.5 years, and 26 years for women, to 84.6 years.
However, the age pension eligibility age has increased by just one year for men and six years for women.
“With many Australians now enjoying a good 30 years of retirement, clearly, something’s gotta give. The age pension framework has simply not kept pace with Australia’s changing lifestyles and demographics,” Mr Ardino said.
“Its original role as a safety net has been transformed. The age pension now primarily serves as a supplementary source of income to superannuation savings.”
Mr Ardino’s comments come as the government undertakes a review into retirement income that aims to examine the age pension, the superannuation guarantee (SG) and voluntary contributions.
He noted that recent research has shown more than half of Australians aged 66 are not accessing the aged pension at all because their assets and incomes are too high, and only 20 per cent are on a part pension.
As a result, he urged the review panel members to consider shifting the focus of the review into super from the accumulation phase to the draw down phase.
“The focus now needs to shift to helping all Australians achieve their income needs and goals in retirement,” Mr Ardino said.
“There are a number of obstacles that need to be removed, or at least addressed, in order to optimise superannuation savings for the average Australian such as housing affordability, wages growth and persistently low interest rates. There is also the issue of too many women still retiring with inadequate superannuation balances.
“The first generation of contributors to our compulsory superannuation system is about to hit retirement. Super funds must be prepared to meet the retirement income needs of this group.”
The pension was never a safety net. The social services pension when out of work was.
Now huge numbers ‘live’ on social services and whinge and government want to get rid of retirement pension.
I’m older and had NO SUPER.
HAD TO WORK TILL I WAS 72.
BERY DIFFICULT TO LIVE A REASONABLE LIFESTYLE ON THE PENSION.
NEEDS TO BE AT LEAST $100.00 PER WEEK EXTRA.
THERE ARE JOBS FOR PEOPLE BUT THEY CAN LIVE ON SOCIAL SECURITY SO DON’T WANT TO WORK.
All true but I feel robbed by my Super in Norwich being highly charging management funds and reducing my funds to nil. The Taxation Office put laws in place before I retired so this would not happen. Appeals to Norwich and Taxation fell on deaf ears.
Pension payments have continually been variously reduced in contrived circumstances that DO NOT affect the fortnightly pension. They significantly reduce support for services and support payments for the Government’s stated pension low payments to bring pensioners back to the expected remuneration that had been underpaid according to the Government’s official statement. Currently not being paid since the first $600.00. SHAME ON YOU ALL THAT HAVE SO REDUCED OUR QUALITY OF LIFE IN RETIREMENT.
Particularly when we paid into our Futures Fund to cover it.. It’s a DISGRACEFUL PITTANCE, and after working all our lives from 14/15 yrs of age, are made to feel like the scum of the Earth. Polititions attitudes are extremely Arrogant….And unlike them we didn’t walk out of the workplace like they do? if we didn’t like what someone else was saying…
[quote=Anonymous]Also make employing pensioners for domestic duties tax deductible. That way the income is properly declared and there’s an incentive for the working population to keep these people engaged.[/quote][quote=Anonymous]Also make employing pensioners for domestic duties tax deductible. That way the income is properly declared and there’s an incentive for the working population to keep these people engaged.[/quote]
Extreme LOL
Why not allow the people who need pensions but have a house as an asset be made to pay back what they used in pension payments out of the sale of their assets. The idea that you keep a very expensive house but expect govt to fund you can’t continue. I hear it all the time. We can’t do anything with aged pension but house is worth millions. They seem to think saving the house for kids inheritance is fair.
Also make employing pensioners for domestic duties tax deductible. That way the income is properly declared and there’s an incentive for the working population to keep these people engaged.
It always amazed me how older people overseas continued to work. Even though they were a lot slower and less physically capable. Yet they still contribute to society.
The difference is minimum wage. With Australia’s minimum so high, businesses can’t afford to retain staff with declining productivity. Min wage for someone over pension age should be reduced to approx $10p.h as a casual.
The other related issue is the interplay of earned income to the income test. Triple the work bonus and cut all age pension by 1/3rd for those under 75. (Maintain the DSP rate though).
This way people that can work, will and they are subsidising their own lifestyle.
Entitlement mentality is alive and well in this country, and the media is happy to feed the chooks
I think Anonymous below pretty much hit the nail on the head and the others have some good points. The life expectancy argument is true. Initially you only got the Aged Pension basically if you hit life expectancy. 67 is completely unsustainable. Probably should be more like 75 – 80. The point about home values is also a good one. I have discussed this many times with my colleagues in the finance industry and virtually everyone say that any value in the home above a minimum (usually average home price) should be included in the assets test. The compulsory super argument doesn’t hold up yet, because when it was brought in in the early 90’s, it was only 3%. Can’t fund retirement on such a small amount. The average wage earner probably needs to put away about 15% of their wage to get close to the funds they need. So this argument just won’t cut it until people have had the chance to put away at an absolute minimum of 10% per annum for their entire working life, which is still at least 15 years away. The comment about employers not willing to let older Australians stay in the workforce is unfortunately true in general. I only see this changing if employers are forced to have say at least 20% of their workforce made up of over 55’s, with half of these staff needing to be say over 60’s.
I think there is another thing to consider… employers not willing to let older Australians stay in the workforce. This has a caused a sad decline in experience and the result is a lowering of service standards and a throwaway society. Social welfare is needed and yet we are too generous at the young end of the spectrum – why are we paying youth allowance? why are young people on unemployment benefits for years and years? It is better to focus on these than the Age Pension. Not because of entitlement… rather because of the inadequacy of our retirement savings regime despite the compulsory super since the 1980’s. Increasing the Age Pension to age 67 is all well and good – yet we have a mindset of retiring in our 50’s…. instead of 60’s or 70’s. Yes, I realise that physical jobs are harder to maintain as our bodies get worn out… yet that is not the majority of workers nowadays. we are more service industry focused and can work longer if allowed and if expected. (both, not one). Change things – yes please. Knee jerk? No thankyou. let’s get some debate at the highest levels happening with real input from our advisers.. rather than product providers. Lets address the investment mix and attitudes towards growth assets for the oldies. Lets see a greater participation in the workforce by our under 30’s. Lets see handouts stopped to the lazy.
Mr Ardino said; “With many Australians now enjoying a good 30 years of retirement, clearly, something’s gotta give.” That part that “give’d” is the broken Department of Human Services. Anyone thinking of relying on the Age pension should now be informed of what it’s like to deal with this broken Department. That surely would be an incentive to save. Remember the days when it was only an hour wait on the phone and you just had to deal with data input mistakes, auto generated letters all a result of overworked staff. Unfortunately it’s gotten worse.
nothing will change… you tell me any Govt that would be stupid to try and reform… That is the problem in this country… crap leaders just disconnected Politicians who only care about keeping their jobs
Totally agree the current framework is simply out of touch with reality however we have a number of issues to be dealt with in fixing the problem.
– The inferred over generations national pension scheme funded out of income taxes that simply never was funded. A generation of under funded superannuants, and those already on an aged pension, simply don’t have time, or resources, to fix the problem themselves
– The industries that don’t accommodate continued engagement due to physical and mental capacity issues. Simply because you live longer does not mean you have a continuing capacity to do what you used to be able to
– The family home remains a scared cow for locking up money. Often with the outcome only being good for the beneficiaries of some future estate
– Discriminating between income earned by funds in accumulation versus pension mode. Taxing investment earnings on funds is not taxing the actually funds invested. It is only taxing the income earned. Despite rhetoric to the contrary.
Increase the aged pension but include the “excess” value tied up in the family home. Say any amount over $1M is included in the assets test?
Tax pension and accumulation funds at the same rate.
Start explaining to people that successive governments over the last 100 years have allowed the falsehood to be perpetuated that there is an entitlement to an aged pension based on income taxes paid in the working life of an Australian. There simply never was any such entitlement based on taxes paid each year as all tax money was continually spent paying last year’s bills that were not funded either.
The aged pension is welfare. A gift from the taxpayers of Australia to those who are less well off. As a nation we need to look after people who can’t look after themselves. However there is no such obligation in relation to those who choose not to look after themselves, or are pursing some ill founded entitlement.
Good luck with turning around the ship Eugene. Certainly no politician seems prepared to have a go.