Plan to increase age pension age to 70 “gone”, says PM

Nest egg, superannuaiton, SMSF, retirement
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The Government will drop its long-standing, but unlegislated, plan to increase the Age Pension age from 67 to 70.

PM Scott Morrison announced the policy change in response to a question from a member of the public on The Today Show.

“I was going to say this next week, but I may as well say it here, Karl. I’ve already consulted my colleagues on that and next week cabinet will be ratifying a decision to reverse taking the pension age to 70. I will remain at 67, which is what Labor increased it to.”

The PM instead pointed to other “positive” measures the Government had implemented.

“I don’t think we need that measure any longer when it comes to raising the pension age and its one of the things I’ll be changing pretty quickly. I’ve talked to my colleagues about it, we’ll ratify it next week. The pension age going to 70, gone!”

Labor has pointed out that Scott Morrison was the Treasurer for the last three Budgets, which included the pension age increase.

The policy of increasing the age pension age from 67 to 70 was included in the 2014/15 Abbott-Hockey Budget. It was planned that the age pension age would start increasing on 1 July 2025, by six months every two years, so that it reached 70 on 1 July 2035.

“This measure will contribute to the repair of the Budget over the medium to long term,” said the 2014/15 Budget papers.

The Government had been unable to legislate the plan, but it remained policy.

The Age Pension age is currently increasing from 65 to 67, which was announced in Labor’s 2009/10 Budget. It is set to reach 67 on 1 July 2023.

Increasing age pension age wasn’t needed: ASFA

The Association of Superannuation Funds of Australia (ASFA) has welcomed the announcement that the Government has dropped its policy of increasing the age pension age to 70.

ASFA CEO Dr Martin Fahy said the decision recognised that many Australians find it hard to work into their late 60s, due to the demands of their occupation or their health.

“Maintaining the existing access age is a fairer public policy than pushing people onto Newstart in their late 60s because they are unable to find or retain employment,” he said.

“Disability rates increase quite sharply for people in their late 60s, with even relatively high levels of take-up of disability support benefits for those aged in their early 60s.”

Dr Fahy said the age pension was affordable, and will continue to be so due to the means test and retirement savings held in superannuation.

“An increase in eligibility age beyond 67 is not needed on affordability grounds in terms of public finance,” he said.

“Superannuation is doing more of the heavy lifting and providing higher retirement incomes.”

Including the scheduled increase to a 12% Super Guarantee rate, ASFA projects a decline in the proportion of people relying solely or almost exclusively on the age pension to go from around 40% now to 20% in 2050.

“It is good to incentivise people working later in life, however the benefit of a safety net for those who are not able to or do not wish to work should be maintained,” said Dr Fahy.

“For those able to work, measures announced in the Federal Budget, such as an increase to the Pension Work Bonus, provide incentives to remain in paid work.”

“Fair go for those that have a go”, says Minister.

Minister for Families and Social Services, Paul Fletcher, said in a statement that the decision to keep the age pension age at 67 “builds on recent Government measures to support older Australians including our decision to retain the energy supplement”.

The Minister also pointed to the Pension Work Bonus and the Pension Loans Scheme.

“We are doing the right thing by senior Australians. The Morrison Government believes in a fair go for those that have a go, and senior Australians have been having a go all their lives,” said the statement.

“Since the Coalition was elected, pensions have increased by $99.20 per fortnight for singles and by $149.40 per fortnight for couples combined.”

In addition to increasing the pension age the 2014/15 Budget had also proposed changes to how the age pension was indexed, which would have slowed increases to the pension. However this was dropped in 2015 in an announcement by then Assistant Treasurer Josh Frydenberg, who is now treasurer.

Forcing manual workers to keep working “unreasonable”

Industry Super deputy chief executive Matt Linden said: “We are pleased that the Morrison government has abandoned Coalition plans to increase the pension age.”

“Forcing manual workers, in particular, to stay at it until 70 would have been unreasonable”.

“Australians do not want to work until they drop.”

“We hope today’s announcement may signal a willingness within government to also reconsider the extent of the 2017 pension asset test changes.”

Dropping pension age increase is good policy: SMSFA

Dropping the policy of increasing the age pension age to 70 is “good policy”, according to the SMSF Association.

“The evidence shows that people’s superannuation balances are starting to kick in, and that the reliance on the Age Pension has dropped faster than anticipated according to the last Intergenerational Report,” said SMSF Association CEO John Maroney.

“It’s also often argued that the average super balance is low, but what this forgets is that it’s based on the average balance in a single superannuation fund. The reality is many people have more than one account or a self-managed super fund, with figures from Challenger Retirement Income Research in October 2016 estimating the average superannuation balance for a couple who have superannuation assets at $330,000.”

“When the high degree of home ownership in Australia compared to other OECD countries is also considered, then the fiscal arguments for a higher retirement age lose a lot of their validity.”

“The three-pillar policy of the Aged Pension, compulsory superannuation and voluntary savings is working as intended, reinforcing the need to have bipartisan political support for a system that is proving to be one of the most successful economic reforms this country has implemented.”

Big win for older workers: AIST

Australian institute of Superannuation Trustees (AIST) CEO Eva Scheerlinck said scrapping the age pension increase policy was a big win for older Australians.

“We welcome the Coalition’s recognition that raising the Age Pension access age to 70 is flawed policy that is out of step with the reality for many older and potentially vulnerable Australians,” said Ms Scheerlinck.

Research from 2014 found that up to 40% of older Australians don’t choose when they retire.

“Ill-health, age discrimination, job type and caring demands all have a significant impact on when a person retires from paid work. Raising the access age for the Age Pension to 70 would have been unfair and discriminatory to many older Australians who simply do not have the opportunity to continue in paid work.”

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