Finance Finance News Push to lift pension age

Push to lift pension age

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The pension age could be pushed back to 70, and older Australians forced to use growing equity in their homes to help pay for government services under proposals designed to help Australia cope with an ageing population.

In a paper titled “An Ageing Australia: Preparing for the Future”, the Productivity Commission projects Australia’s population will grow from about 23 million in 2012 to about 38 million by 2060, with a substantial increase in the number of retirees as people live longer.

That will mean lower overall participation in the workforce, and more pressures on governments to pay for higher health, aged care and pension costs.

“Population growth and ageing will affect labour supply, economic output, infrastructure requirements and governments’ budgets,” commission chairman Peter Harris said.

“The best time to develop policies that address the inescapable implications of demographic change is while the transition is in its infancy. It is a good time to start a debate, and to float creative policy options.”

The report, released on Friday, projected Australia would have four million more people aged 75 years or older by 2060, with 25 centenarians for every 100 newborns, compared with one centenarian for every newborn in 2012.

It said Sydney and Melbourne would each have about seven million residents.

The pension age is set to gradually increase from 65 to 67 by 2023. The Productivity Commission said there was a case to increase the pension age to 70, as people were living longer into retirement.

The commission also proposed an “equity release scheme” for older Australians who own their own homes, to help pay for health and aged-care services.

The scheme would mean those who own their homes contribute half of the annual real increased house value to the government, which would then help cut government spending by about 30 per cent.

“An equity release scheme of this kind would still leave older households with an appreciating asset base and provide a means to increase the quality of services provided over the longer term,” it said.