Raising the pension age will hit most vulnerable

The federal government is considering to raise the retirement age incrementally. Robin Harvey, Charles Sturt University lecturer in Gerontology, believes any move to increase the pension age would hit the most vulnerable older Australians hardest.

Raising the age for access to the aged pension to 70 years would not be a well considered response to the issue of sustainability of support for older Australians. Such a move would constitute poor social policy for many reasons, including that it is based on partial and inadequate analysis of the issues around an ageing population; targets the poorest and most vulnerable older Australians; ignores associated problems, such as negative impact on youth employment, and fails to address the costs of superannuation tax concessions which are rising faster than the cost of the aged pension and which disproportionately benefit the wealthiest older Australians.

Importantly, this suggested change does the following:

•  It takes an easy and visible target – the aged pension – and labels it as a problem, irrespective of its real cost and benefits to the community. Where is the analysis for this? OECD Statistics for 2013 show that Australia, at 8.569%, has the 5th lowest expenditure on welfare (including age pension) as a percentage of GDP of all OECD countries. (NZ 9.848%; US 9.703%; UK 12.179%). People on low incomes such as the aged pension spend most of their income on products and services, thus supporting economic activity. These are just two indicators that Australia does not have a major problem of overspending on welfare or the aged pension
• It would disproportionally disadvantage the most vulnerable older people, those who have worked in low income jobs, those in physically taxing occupations, women whose childrearing breaks from employment have reduced  their opportunity to accrue superannuation, older people transferring from other benefits (Disability, Newstart)
• It ignores the issues of job access for older people, in a culture where ageism in employment is high and many older people struggle to find employment
• It ignores the impact of older people working longer on youth access to employment. Long-term youth unemployment is currently a growing problem in Australia
• It ignores the cost of superannuation tax concessions, which benefit the highest paid people, and cost taxpayers in lost revenue approximately 35 billion  in 2013-14, almost as much as the aged pension currently at 39 billion. Superannuation tax concessions are projected by Treasury to rise 12% per annum to 50.7 b in 2016-17. While opponents of reduction of tax concessions argue that the amount of tax currently foregone will not transfer equally to revenue due to the potential for people to change their investing in superannuation, this still constitutes an area for potentially large increases to revenue
• It is window dressing in relation to the government’s claim of current budget shortfalls and need to save as it will not take effect until generation X reaches pension age. This begs the question as to why this potential change is being foregrounded by the Treasurer in this way.

Government retirement income support for Australia’s ageing population includes both the aged pension and superannuation tax concessions. Any consideration of cutting expenditure on retirement income support needs to look comprehensively at both of these costs and also consider raising revenue rather than simply cutting costs.

The Australia Institute released a new report on 22 April 2014, Sustaining Us All In Retirement, which advocates radical changes, including a universal aged pension and scrapping of superannuation tax concessions.

While I haven’t yet fully examined this report, I welcome such contributions as an indicator of the sort of comprehensive and thorough analysis and debate of options which should underpin any proposals to sustainably support our older Australians in retirement.

The current hints by the Abbott government on raising the age pension access age to 70 represent a simplistic and poor policy response. We can afford to do much better for our community and for older Australians.

0 Comments

1. 

   Allan Catlin

   May 1, 2014 at 12:41 pm

   pension age

   I can't help but totally agree with Robin Harvey's comments. I would add that the present government is doing very little, if anything, that I support. As a pensioner who has transferred from a disability pension to an age pension, I endorse comments re the affect this pension age change would mean. I would love to have been able to work on but am physically unable to, following a stroke. Do Hockey and Abbot have any idea of how many people will be in similar situations? As we get older, it seems we are more liable to strokes, heart attacks, Parkinson's disease, etc. And changes to medical costs will impact us there too. Are older people the new whipping boys (and girls) of this century? Let's have an election!