Working Australians have lashed out at new modelling suggesting the country’s pension age should increase to 70 years by 2050.
Low birth rates and an ageing population are to blame for the need to increase the age of retirement, according to research by Macquarie University’s Business school.
Currently, senior Australians are eligible for the age pension at 65 years and six months if they were born between July 1, 1952 and December 31, 1953.
Those born after the latter date and before June 30, 1955 can receive senior welfare benefits once they turn 66 years old.
The age is then increased to 66 years and six months for those born between July 1, 1955 and December 31, 1965.
And it doesn’t end there, with the pension age increasing yet again on July 1 this year to 67 years old for those born after January 1, 1957.
In addition to reaching age requirements, there are also a number of income, residence and asset tests one must meet to be eligible for the welfare payment.
According to the university’s statistician Professor Hanlin Shang and his co-authors, three more pension age increases should occur in the next 27 years based on their analysis.
By 2030, the age will increase to 68, before rising to 69 in 2036 and 70 by 2050. It’s hoped this formula will help working Australians sustain the livelihoods of their elderly unemployed counterparts.
“Less people in the working group and more in retirement will make the old age dependency ratio (OADR) higher,” Professor Shang told Macquarie University’s The Lighthouse publication.
“What this means is there are less working people to support elderly people. And with more elderly people in the population, this will create a burden for the government pension system.”
It’s also predicted the number of centenarians will soar by 2050 to 50,000 people, according to the federal government treasury office – giving more reason to increase the pension age.
“Who would have ever thought there would be so many centenarians?” Professor Shang said.
“As people live longer, there is a longevity risk and they’ll consume more pension from the government.”
Unwelcome news for younger generations
While it’s great to see people living longer, news of the pension age rise wasn’t entirely welcomed by Millennials, Gen Z and Gen X who just realised their time in the workforce is about to lengthen.
“I’m turning 40 this year. If I can work until 70 it’ll be a miracle,” one father-of-three tweeted.
“I work in a laborious job and have many injuries and one major injury in the last two years. My body is already telling me it wants to stop and find an easier job.”
One Gen X employee added: “Try and be a tradie at 70.”
“People in their 60s are exhausted, I’ve got back pain from nursing. I cannot work anymore. People should not have to work in old age,” a retired nurse from the boomer generation commented.
Meanwhile other working Australians said they were saving money now and increasing their superannuation payments as they don’t expect to receive the pension by the time they retire.
“I’ve been telling my kids for years to put (money) away as there won’t be a pension as we know it. Luckily my advice is sort of being listened to,” one parent said.
Another young Australian worker added: “I’m exactly this age. Unfortunately I don’t think there will be a pension for me. I’ve been putting extra into super since I was 32 in preparation for having to be self funded. Boomers with million dollar homes that claim a pension really sh*t me.”
Those born in the boomer era have their birthdays between 1955 and 1964, whereas Gen X were born between 1965 and 1980.
This is followed by Millennials with birthdays between 1981 and 1996 and Gen Z being 1997 to 2012.
Keep the conversation going – rebecca.borg@news.com.au
The situation could have been worse
While Professor Shang’s modelling paints a bleak future for working Australians, in hindsight it’s a better prediction than what former Prime Minister Tony Abbott’s treasury proposed.
In the 2014 federal budget, the Liberal party suggested increasing the retirement age a lot earlier, with it to rise by six months every two years from July 2025.
This would mean the qualifying age of the pension would have reached 70 years by July 2035, 15 years prior to Professor Shang’s prediction.
Fortunately, former Prime Minister Scott Morrison abandoned the never legislated policy in September 2018 and along with the Rudd Labor government, passed laws to lift the pension age to 67 by July this year.
The decision was applauded by Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck.
“We welcome recognition by the Coalition that raising the age pension access age to 70 was flawed policy that was out of step with the reality for many older, vulnerable Australians,” she said in 2018.
“Retirement income policies need to recognise that many individuals will have a different work pattern and may not necessarily be in a position to choose their own retirement age.”
Alternatives to increasing the number of working Aussies
The government may be able to come up with a solution to saving working Australians’ retirement plans, with Professor Shang suggesting the country’s leaders should look overseas.
His first proposal is to drive up the total fertility rate by introducing a government policy similar to ones in Canada, Singapore and South Korea.
“The Canadian Government provides affordable childcare at $10 a day,” Professor Shang said.
“The South Korean Government offers new parents $10,500 and in the recent Singapore Budget 2023, to encourage higher birthrates, parents will receive an additional $3000 baby bonus, paid paternity leave and tax relief for working mothers.”
Such proposals would be welcomed by working Australian parents who constantly face the decision of forking out hundreds in childcare fees to stay in their job or give up work so they can care for their child.
Meanwhile Professor Shang proposed increasing the number of migrants welcomed to Australia in a bid to increase both fertility rates and the country’s future workforce as the current population ages.