There is wide speculation that the government will announce changes to the eligibility criteria and/or calculation of benefits for the age pension in the upcoming federal budget. These changes may involve:
- Increasing the minimum eligibility age to 70
- Pegging the indexation of age pension benefits to CPI rather than average earnings
- Altering the assets and income tests that determine financial eligibility for the pension
So – what are various community groups saying with regards to the mooted changes?
Council on the Ageing (COTA)
COTA Australia is calling for an urgent meeting with Prime Minister Tony Abbott to discuss pensioners concerns about any change to age pension indexation arrangements, eligibility age, or including the home in the assets test. “Older Australians are growing increasingly fearful that the Prime Minister will renege on his pre-election promises and introduce changes to the pension,” said COTA Australia Chief Executive Ian Yates. “Seniors fought long and hard to get to a point where the pension allows them to keep their heads just above water. We can?t afford any backward steps now which would have pensioners slipping below the poverty line again.”
Australian Institute of Superannuation Trustees (AIST)
The AIST has warned that any rise in the retirement age must be accompanied by measures to protect older Australians who are unable to work longer, as many workers do not get to choose the timing of their retirement. “The sustainability of the pension and superannuation system is vitally important but, at the same time, we mustn?t ignore the reality that a disturbing number of older Australians are forced out of work early,” said AIST CEO Tom Garcia. “Timing retirement is a lottery – millions of Australians don?t get to choose when they exit the workforce and our retirement policies need to deal with real people, not just numbers.”
The Association of Superannuation Funds of Australia (ASFA)
ASFA has said that changes to the age pension affect superannuation, which would reinforce the need for Superannuation Guarantee contributions to rise to 12 per cent of wages and for assistance for low income earners in the form of the Low Income Superannuation Contribution (LISC) to continue. “The ASFA Retirement Standard indicates that a single retiree needs to spend $23,175 a year to support a modest lifestyle in retirement and $42,158 to support a comfortable lifestyle,” said ASFA CEO Ms Pauline Vamos. “If the Age Pension had been indexed to only changes in the CPI over the period from the year 2000 to now, the Age Pension for a single person would now be some $7,000 a year less. A single retiree would need around $175,000 more in superannuation savings to support their desired lifestyle in retirement.”
The Financial Services Council (FSC)
The FSC supports changes to the age pension eligibility, as well as changes to the age at which superannuation can be accessed. “Australia?s retirement system is not sustainable,” said CEO of the Financial Services Council, John Brogden. “Many Australians starting work today will live for more than one century. It is critical that the increased life expectancy of Australians is the driver for Age Pension and superannuation policy, so future generations of taxpayers are not burdened with the cost of our retirement.”
Productivity Commission
Late in 2013, the Productivity Commission released a report examining the national economic effects of an ageing population. The Commission pointed out the substantial fiscal benefits of increasing the pension eligibility age to 70, including an increase in work participation rate of older Australians and federal budget savings. As the report concludes, “population ageing is a desirable side product of success. All highly”‘developed countries have longer life expectancy and lower fertility rates than poor countries. However, population ageing entails major economic and social transformation…”
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