Money Retirement Pension age rises will mean later super access

Pension age rises will mean later super access

Your retirement might be later than you think. Photo: Getty
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The age at which you can receive the age pension is on the rise, up to 65.5 from July 1 and it could be as high as 70 within two decades.

There’s a big unanswered question related to that which the politicians don’t seem to want to touch; will that push up the superannuation preservation age?

The pension age will move to 67 by 2023 under a measure introduced by Labor back in 2009. The government has it slated to move to 70 by 2035 although PM Turnbull and Social Services minister Christian Porter side stepped the issue when Labor brought it up in parliament this week.

Labor, for the record, opposes the move and has done so since it was first introduced.

The measure was originally recommended to start in 2053 by the Abbott Government’s Audit Committee chaired by Tony Shepherd. But the Abbott budget in 2014 brought this back to 2035.

But even if the move to 70 were to come off the agenda in the medium term, there is still currently a mismatch between the age you can take super and the age you get the pension.

A few years ago you could take your super at 55. Now it’s 56 and it is moving  towards  60, a point it will reach for those born from mid 1964 in 2021.

Supernatants are getting older. Source: ATO
Superannuants are getting older. Source: ATO

The point of raising the preservation age was to keep it within five years of the pension age. Allowing the gap to widen would “encourage people to take their super, spend it and live off the pension,” said Ian Yates, CEO of lobby group Council on the Ageing.

Robert Curley, a director of Association of Independent Retirees, said his organisation would support a move. “The super preservation age should be maintained at five years below the pension age.”

But some take a much harder line than this. Brendan Coates, a researcher with the Grattan Institute, told The New Daily that he “supports an increase in both the pension age and the super preservation age to 70.”

“It would help reduce the budget deficit and increase GDP quite significantly.”

Mr Coates said research done by Grattan in 2012 had shown that those two measures would “cut the budget deficit by $12 billion in today’s dollars and increase GDP by at least 2 per cent”.

The economic benefit would come from “pushing people to work for longer”, Mr Coates said. The budget benefits would come from lower pension payments and higher taxes on super savings.

Of course not everyone takes what many would see as such a hard line approach. Mr Curley said “if you take the preservation age to 67 or 70 it negates the idea of super”.

“There needs to be a reasonable period for people to access and enjoy their superannuation.” Keeping too big a gap between preservation and pension age would also negate the idea of super by encouraging people to spend it early, he said.

Tony Shepherd wanted a later start than Tony Abbott. Photo: AAP
Tony Shepherd wanted a later start than Tony Abbott. Photo: AAP

Mr Coates said any increase in both benchmarks would have to be done gradually and adequate arrangements put in place to allow older people who could no longer work to be get the disability pension (which pays the same as the age pension).

“Otherwise there would be be a risk that people who couldn’t work any more would be forced onto Newstart [unemployment benefits],” Mr Coates said.

A spokesman for Labor’s superannuation shadow minister
Katy Gallagher said the opposition “did not have a view” on raising the preservation age. Financial Services Minister Kelly O’Dwyer did not respond to questions on the issue from The New Daily.

Mr Yates said resources would have to be put in place to help older people transition to new roles and jobs that matched their capabilities if working lives were to be extended to 70.

“If people are working longer we can’t expect them to have the same career path from 25 to 70.”

Extending working lives is a big issue through the OECD. As the following chart shows, Australia currently sits around the average of its peers.

OECD retirement ages in 2014. Source: OECD
OECD retirement ages in 2014. Source: OECD

Canadian Prime Minister Justin Trudeau was elected on a platform of reversing a retirement age rise from 65 to 67. But recently an economic advisory committee recommended a rise and measures to encourage people to work beyond 70.

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