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Guard your future against potential policy shocks

A recent report by the Productivity Commission canvassing a potential increase in the pension eligibility age to 70 spurred a lively debate in the Australian community, writes Pauline Vamos.

Aspate of letters to editors of various newspapers held a variety of views, with some arguing any increase would be an injustice to Australia’s future retirees. Others supported the idea, stating that an increase would be fair, particularly given the massive gains in life expectancy which have occurred over the past century. While there are good arguments on both sides of the coin, what’s more important is that policy makers consider a range of factors when contemplating this somewhat controversial proposal.

If you look at the economic reasoning behind the proposal, there’s no doubt the rationale is solid. For years now politicians, economists and academics of all persuasions have been telling us that the demographics of our population are changing. The current ratio of workers to retirees is around 5:1. Over the next few decades, this is expected to decrease to just two workers for every retiree, but there will be fewer dependants aged under 15. This poses great challenges for governments now and into the future. With fewer people of working age paying taxes to help fund the services provided to people in their retirement years, governments will need to make tough decisions when it comes to how they spend taxpayer dollars.

The Productivity Commission estimated that increasing the pension age to 70 would reduce government expenditure on the payment alone by around $3 billion to $4 billion annually. With budgets getting tighter, this is an attractive saving. Increasing the age pension eligibility age can also take pressure off government expenditure on other payments which the pension is linked to. The Department of Human Services website lists 20 additional payments and services which may be available to people receiving the Age Pension. Increasing the pension age would also affect eligibility for these other government payments, generating even more savings for the government.

However to look at the proposal solely through an economic lens is short-sighted, as it largely ignores the other factors which often contribute to a person’s decision to retire from the workforce.

One major factor is a person’s mental and physical health. Due to a decline in either or both, many people reaching their late 60s and early 70s are simply either unable to work at all, or can no longer perform the roles they have been working in. At present, a large proportion of individuals who move onto the full Age Pension at age 65 have previously been on the disability pension. It’s likely that a raise in the pension age would force more people onto the disability pension, which would somewhat defeat the economic benefits of the proposal. The Productivity Commission estimates of cost savings assume that only a relatively small proportion of people aged 67 to 70 would go onto the Disability Pension if the eligibility age for the Age Pension was increased to 70.

“Given that we don’t know what the health status of older workers will be in the next decade or two, or what the job prospects will be like, it’s ASFA’s view that any decision to further increase the eligibility age for the Age Pension should not be taken for another decade. “

While retraining these workers is good in theory, the reality is that the job market for older workers is not booming. With no jobs to go to, even the most skilled retrained worker may find themselves forced to apply for the Newstart Allowance in order to survive. Not only would this be unfair, it would also substantially reduce the positive economic impact of the policy.

Given that we don’t know what the health status of older workers will be in the next decade or two, or what the job prospects will be like, it’s ASFA’s view that any decision to further increase the eligibility age for the Age Pension should not be taken for another decade. This would give the community time to adjust to the change, and would also avoid punishing those Australians who are close to retirement now and have not had time to plan to work longer.

It’s also important that any large-scale changes to the welfare and superannuation systems be made in a broader context of how we should design these systems to accommodate the challenges posed by an ageing population.

Pulling one lever in the system often upsets the community, and can lead to adverse consequences, as people change their behaviour to reduce the impact of the change. This is why we continue to urge policy makers to take a long-term, holistic view of the future design of our welfare and superannuation systems, and consider policies that will deliver the best retirement outcomes to all Australians. However, we know governments aren’t always predictable so the best way to guard your financial future against potential policy shocks is to boost your retirement savings as much as you possibly can.

There are some simple steps everyone can take to make sure they are getting the most from their super:


If you’ve had more than one job, chances are you also have more than one super account. Moving all your super into one account can help you save on fees and will also make managing your super easier.


Tracking down lost super is another way to boost your retirement nest egg. Currently there are billions of dollars in lost and unclaimed super, and chances are that some of it belongs to you. Use the ATO SuperSeeker tool to search for your lost and unclaimed super, then contact the fund to arrange to move it into your active super account.


Check with your fund to see what services they offer to their members. For example, they may be able to provide advice on the best insurance or investment options for your particular circumstances. They also may have tools or calculators to help you figure out how much you need to save for your retirement and how to get there.


Making small changes – like having one less coffee a day and putting this extra money into your super – can add thousands of dollars to your balance in retirement. The earlier you start saving, the more you will benefit, so think about making these small changes today.

Ms Pauline Vamos


The chief executive of the Association of Superannuation Funds of Australia (ASFA), Pauline Vamos is a qualified lawyer and has over 20 years’ experience in the financial services industry. One of the most authoritative speakers on the industry, Pauline has been a regulator, corporate counsel, head of compliance, a strategic risk consultant as well as a trustee director. She is constantly sought for comment by media and as a speaker for business.

Previously, Pauline was director, financial services regulation – licensing and business operations at the Australian Securities and Investments Commission. In that role, she managed the successful implementation of the Financial Services Reform Act. This position cemented her reputation as a leading industry figure and she was voted “Most Influential in the Financial Services Industry” in Money Management as well as “Most Influential in the Superannuation Industry” in Super Review.

Pauline is a member of the Federal Government’s Superannuation Advisory Committee and was on Treasury’s Stronger Super Peak Consultative Group; tasked with advising the Government on how to best implement the Stronger Super package announced in response to the Cooper Review of superannuation. In May 2012 Pauline was appointed to the Advisory Council for the newly established Centre for International Finance and Regulation; an academic centre of excellence for research and education in the financial sector. She also sits on the Infrastructure Finance Working Group and the Superannuation Roundtable announced in early-2012.

Association of Superannuation Funds of Australia (ASFA)

ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation whose aim is to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.

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