Time to increase the eligibility age for the Aged Pension?

Federal politicians understandably got a lot of correspondence expressing concern about the low level of the Age Pension. In amongst those that I got, every now and then there would be one which would assert that we have all had to pay extra income tax for the last sixty years for a fund which was supposed to have been used to provide for the pension but never has.

As with many such claims, it is half right. It is also an example from an earlier era of a policy which was either poorly thought through or always a bit of a con.

I was reminded of this while looking through the newly updated guide from the Parliamentary Library on the history of superannuation and retirement income in Australia. It is a brief but fascinating insight into the many changes made to laws affecting Age Pensions and superannuation type payments over the last century.

The part that refers to the occasional correspondent’s claim I note above is from 1945:

The Chifley Government introduced an additional levy on personal income tax which, along with a payroll tax from employers, was credited to the National Welfare Fund. There was, however, no direct link between contributions and benefits and the pension. The National Welfare Fund, whilst set up as a means of establishing a base from which a national superannuation fund could be operated, was in practice merely an accounting device until its abolition in 1985

It is amazing just how many changes have been made in this area, particularly in the last couple of decades. There were a few things I found especially interesting.

Firstly, that the eligibility for the initial Age Pension included character, race and means test.

Secondly, the removal of means and then assets tests for the Age Pension in the Whitlam and early Fraser era, followed by a re-introduction of these in the early years of the Hawke government.

But the thing I found most interesting thing of all was the one thing that hasn’t changed since the very first Commonwealth Age Pension was introduced just over 100 years ago on 10 June 1908 – namely the eligibility age of 65. It hasn’t moved upwards over all that time, even though life expectancy in Australia has increased by over 20 years since that time. (The eligibility age for women was reduced to 60 in 1910 but in recent years was brought back up to 65).

According to this table, life expectancy for those born in 1901-1910 was 55.2 for men and 58.8 for women. It is now 78.5 for men and 83.3 for women.

I guess it would be a brave (i.e. suicidal) government who would propose to lift the eligibility age for the Age Pension, but it probably is something that should be put into the mix amongst the current debate about increasing the pension rate to address the very real difficulties many pensioners have in affording to live on what is undoubtedly a low income – particularly if you don’t own your own home and aren’t in public housing.

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11 Comments

  1. Interesting. Most of the 65-year-olds I know are active and spritely! Surely there’s a case for gradually phasing in an increase in the eligibility age to at least 68 or 70 over the next decade or so and using the savings to fund an increase in the pension amount.

  2. The increase in life expectancy you’re talking about refers to life expectancy AT BIRTH, so it’s massively influenced by infant mortality, which I suppose isn’t really relevant to what age the pension should start at. Life expectancy for adults has increased too, but not much.

  3. P.S. Thanks for giving the link to the AIHW’s web site. That shows that life expectancy at age 65 has gone up by about 7 years for men and about 8 years for women over the last 100 years.

  4. I think the government is already moving in the direction of increasing the age at which people receive the Age Pension.

    Younger people can’t get their superannuation until they are 70. I think the pension will soon follow.

    I don’t think it will be too far down the track that the Age Pension will cease to exist, with most people dying before they receive any superannuation benefits – and a global government pocketing the proceeds.

  5. As the population ages this is a tough decision someone has to make. The previous government tried to encourage older Australians to stay at work a little longer or to take up part time work after retirement age. If these measures or similar aren’t enough, and I suspect they won’t be, a gradual increase in the age may need to be contemplated.

  6. A few thoughts:

    The problem with raising the age limit is your mortality age past 65 is going to be greatly affected by your genetics, environment (home and workplace).

    I suspect you’d actually find a lot of support from employed workers reaching retirement age though. Many of these old people need to be wedged out of their jobs with a crow-bar.

    Perhaps retirement to the pension being made optional at a little later than now, and mandatory only much later, would be the best of both worlds. If you’re a 66 year old unemployed person on Newstart, you’ve honestly got buckley’s chance of finding any decent full time work.

  7. Why not have a more gradual transition from other forms of welfare to the age pension? At the moment one moves magically from being a $437 a fortnight dole bludger subject to activity tests and all the rest of it to being a $547 a fortnight senior citizen who’s earned a modest income from a grateful nation, all by turning 65.

    Why not increase Newstart to the same level as the age pension for people aged 65 to 70 but retain some sort of activity test? In that way people would be encouraged to keep working if they could find it, while those who could not find work would not suffer a financial penalty. Then at 70, the activity test could be eliminated.

  8. I’m about to go onto the old age pension (I’m just over 63) and am jumping for joy! As a single woman without a university degree, although trained as a secondary school teacher, I’ve been really struggling to find work, much of which has been casual, part-time, physically demanding, low status and low paid.

    Most people don’t realise that incomes do not need to be taxed. There are other ways to fund public spending. So, with a reformed tax system, there need be no fears that younger people would need to work to fund old age pensions. A proportion of our current military spending, by the way, would fund all pensions plus many climate change initiatives! I’m in favour of reducing the elegibility age for pensions.

    If you’re interested in a much more efficient and equitable tax system, have a look at http://www.taxreform.com.au/

  9. i think that the govt and the so called intelegent ppl just dont get it .
    most ppl who are nearing retirment age have worked very hard throughout there working lives.
    i for one have averaged 50 hours a week since i was 15.
    and the govt at times have taken half of my wage.
    so here is a thought .
    why not let those ppl who have reached the age earn say $200 a week tax free and still get the pension which they have worked hard for .
    here is the point the $200 would be spent on things that attract the gst.
    how hard is that to work out.

    we all win
    govt gets its cut
    it makes working on attractive to older ppl.
    less pressure on the hospitals because ppl will be more active longer.
    etc etc.

  10. I spent most of my day sweeping the floor of a potato grading shed.It was unpaid,goes to keep the roof over my head.I committed no crimes today.I didn’t add to our national debt,I am owed about 58 dollars from the Tax Office if I obey rules,laws,and send in a tax return.For the fortnightly non-aged pensioner pension,at the end of the fortnight there has been no voluntary savings on my part.I keep on reading about how hard-working people suggest they are.I think work has to be really defined better than for the requirement of Acts of Parliament,before retirement age is set for revision.I simply cannot accept often ,what people say is hard work,so I am not ready at all to accept 65 years of age is too young to retire.

  11. KIKA:

    You said you were in favour of reducing the eligibility age for pensions.

    It seems that most employers do not want women over 50 – probably the same for men.

    Women born before 1 July 1955 are still entitled to a Widow Allowance if they are single. Unfortunately the payment is much less than a pension, with a harsher income test and a requirement for voluntary participation.

    I couldn’t imagine why any able-bodied woman would want to be on such a payment unless she is completely incapable of working, in which case she ought to be entitled to a Disability Support Pension.

    With my Disability Support Pension up for review every 2 years, I’m afraid of being dumped on a Widow Allowance. I scrape in on the eligibility criteria by 3-1/2 weeks, which may sound like a plus, but could actually turn out to be a minus.

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