The Association of Superannuation Funds of Australia (ASFA) says it is important to take a long-term view when it comes to the recommendations made by the National Commission of Audit, particularly those that consider changes to the structure and design of Australia’s retirement incomes systems.
Recognising the interaction between systems, and the important role each plays, is also crucial when considering how governments now, and in the future, will respond to the challenges posed by an ageing population and budgets under increased pressure.
CEO Ms Pauline Vamos says ASFA shares the Commission’s view that any changes to the pension system must be phased in over the long term. Any changes to the superannuation system should also be made using a long-term approach, to ensure people have the stability and certainty they need to plan how they will fund their retirement years.
“We encourage the government to take a long-term, holistic view when considering the report’s recommendations, and adopt a similar approach. Overall, we look forward to working with the government on a long-term approach to the design and sustainability of Australia’s retirement income system.”
Rise in the Age Pension eligibility age
Australians are living longer in retirement than ever before, and there’s no doubt that the pressures this will place on future government expenditure is a key consideration for policy-makers today. However, it’s important that other social and health-related factors are taken into account when considering any further changes to the qualifying age.
“For many people, once they reach their late 60s and early 70s, they are either unable to work at all, or can no longer physically perform the roles they have been working in,” says Ms Vamos.
“This may require governments to offer some form of relief or carve out for individuals who have spent a lifetime in labour intensive work, if they are to raise the pension eligibity age to 70.
“Retraining workers is not always an option, and in many workplaces the environment is not supportive for older workers. This means many individuals in this age group are likely to be forced to apply for the Newstart Allowance or the Disability Pension in order to survive.”
At present, around 15 per cent of people age 60-64 receive the Disability Pension. If the Age Pension eligibility age was increased, ASFA believes around 40-50 per cent of people aged 67 to 69 would have to seek the Disability Pension or Newstart Allowance.
“This would substantially reduce the projected savings to the budget bottom line from increasing the eligibility age,” says Ms Vamos.
“Ensuring there are work opportunities for older Australians is also crucial, which is why any increase should be matched by government policies which encourage employers to take on older workers.
“It’s also important to consider the impact of a measure designed to decrease the costs of the Age Pension may have on the community, such as the preparedness of people to save voluntarily for their retirement.”
Rise in preservation age
The Commission has recommended that the superannuation preservation age should be set at least five years less than the Age Pension eligibility age.
“It’s long been ASFA’s policy that the preservation age for superannuation should be set at least five years below that of the Age Pension eligibility,” says Ms Vamos.
“However, it’s important that such changes be considered in a broader context. In particular, we would encourage the government to consider policies that encourage people to take up income stream products in retirement, to help people manage their superannuation savings across their retirement years.
“Such policies could also encourage innovation of post-retirement income stream development, and help deliver a more flexible range of options to suit a variety of retiree’s needs,” Ms Vamos concluded.
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