When we’re younger and enjoying our work it’s easy to imagine doing it for the rest of our lives. As we age, though, that option may seem less and less appealing. According to the Combined Pensioners and Superannuants Association (CPSA), financial insecurity means a growing number of Australians may be forced to work into their 70s.
“The Australian Bureau of Statistics latest figures show that 23% of people over the age of 45 plan to retire after they turn 70, up from 8% in 2004-05,” said Ellis Blaikie, Senior Policy Adviser.
“This increase suggests growing uncertainty for older Australians about the state of their finances in retirement.
“For low income earners, the 9.5% superannuation contribution is simply too low to provide adequate savings in retirement. And that’s assuming continuous employment throughout their life.”
Will your health hold up?
An AMP.NATSEM report in 2015 (‘Going the Distance’) looked at how Australians age through their sixties and whether they will be healthy enough to work longer. Rather ominously, it concluded that working longer will be a challenge for one in four (25.6%) men and one in five (20.4%) women who are predicted to be in fair or poor health when aged 60-69 in 2035.
AMP Chief Customer Officer Paul Sainsbury said the report showed health will be an important factor in the later years of working life and our ability to save for retirement.
“The good news is that Australians are living longer. But we know more years in retirement places more strain on our superannuation balances so it’s likely many of us will need to work longer.
“This raises some confronting questions, in particular, how healthy we will be in the later years of our working life and what our financial position will be.
“Rather than simply working longer, we need to re-think our approach to retirement. Reaching a certain age shouldn’t mean we need to leave the workforce entirely. Early years in retirement should be a transition period with reduced levels of work, giving people more time to focus on their interests and wellbeing, while still saving money,” Mr Sainsbury said.
Is an increase in the superannuation guarantee (SG) rate the answer?
In a submission to the Senate Committee Inquiry into superannuation and standards of living in retirement the CEO of REST Industry Super, Damian Hill, argued the case for a rise to 15%, as well as other targeted superannuation incentives to help people become self-funded in retirement.
“Importantly our superannuation system needs to be fit for purpose and not one that is structured in such a way as to only suit a few lucky demographics,” he said in an interview with CANSTAR.
“As it stands, only one in five of contributing female REST members are currently on track for a comfortable retirement. This is simply not good enough.
“I think in the next ten years, and particularly as we come together to think seriously about our superannuation system we will be even further advanced toward a system that means more Australians are supported in saving for a comfortable retirement with less reliance on the Age Pension.”
Increase in Age Pension qualifying age
Another factor that may encourage workers to stay in the workforce for longer is the possibility that the qualifying age for the Age Pension will be further increased. This is an issue that concern the CPSA.
“The Government’s plans to increase the Age Pension qualifying age to 70 will only make matters worse for the people locked out of the workforce for reasons beyond their control,” said Ms Blaikie.
“CPSA calls on the Government and election candidates to make a commitment to maintaining the Age Pension safety net. Financial security in retirement is a make or break issue for older Australians.”