John Collett, November 22, 2013
The Productivity Commission’s raising of the possibility of lifting the age pension threshold to 70 is a warning to get serious about saving for retirement.
You may be in your 30s or 40s and think it does not concern you because retirement is a long way off. For most people the “oh my god” moment comes in their 50s and it is then that they get serious about saving for retirement. But leaving it to then is a recipe for an impoverished retirement.
But an aging population means that, one way or another, the ballooning government outlays to fund retirement is going to be pared back. The process has already started with the age pension age on its way to age 67 from 65, but earlier for women born before January 1, 1949.
The qualifying age will gradually increase so that by July 1, 2023 it will be 67 for men and women. That means an age pension age of 67 for anyone younger than their mid-50s.
The increase to age 67 is a big deal given that retirees overwhelmingly rely on the age pension. About two-thirds of those in retirement claim at least a part age pension.
And the benefit is not only the pension itself, as even a few dollars a fortnight from the age pension entitles the pensioners to 100 per cent of a range of pensioner discounts.
The obvious solution to having to wait longer for the age pension is to work for longer. That is even more so given that we are living for longer and have longer retirements to fund.
A recent report by the Actuaries Institute estimates that one in three of those aged 65 now will live past 90. And with the advances in medicine and further improvements in longevity, the Institute says is it quite possible that in coming years, half of all 65-years-olds could live beyond 100.
A lucky few will be able to work well into their 60s. But working for longer is not an option for most blue-collar workers with physically demanding jobs. Then there is the casualisation of the workforce and general job insecurity.
The upshot is that workers must take saving for their retirement seriously, even though it may seem a long way off. Making the most of sacrificing salary into superannuation as early as possible is the best way of insuring against the further tightening of accessibility to the age pension.