Decision to keep retirement age at 67 lauded

SMSF Association Media Release 

06 September 2018

The Federal Government’s decision to keep the Aged Pension at 67 and not increase it incrementally to reach 70 by 2035 is good policy, says the SMSF Association CEO John Maroney.

“The evidence shows that people’s superannuation balances are starting to kick in, and that the reliance on the Age Pension has dropped faster than anticipated according to the last Intergenerational Report.

“This was highlighted in a Productivity Commission graph, which can be found here, showing the projected growing role of superannuation in people’s retirement incomes from 1992 to 2029.

“It’s also often argued that the average super balance is low, but what this forgets is that it’s based on the average balance in a single superannuation fund. The reality is many people have more than one account or a self-managed super fund, with figures from Challenger Retirement Income Research in October 2016 estimating the average superannuation balance for a couple who have superannuation assets at $330,000.

“When the high degree of home ownership in Australia compared to other OECD countries is also considered, then the fiscal arguments for a higher retirement age lose a lot of their validity.”

Maroney says there are two other important factors at play that make any decision to increase the retirement age problematic.

“First, there are many workers involved in physically intensive work, as well as those sustaining work-related injuries or are unable to work due to illness, for whom a higher retirement age is simply not feasible. Determining who is eligible and who isn’t would be a difficult decision for government.

“Second, Australian Bureau of Statistics figures show that many people post the Global Financial Crisis (GFC) are choosing to stay longer in the workforce because they have a more realistic assessment of their long-term financial needs and enjoy the social connectivity associated with work. They might only be working part-time or on a consultancy basis, but they remain active participants in the workforce.”

Maroney says what the Government announcement highlights is how compulsory superannuation, which took effect in 1992, is achieving its goal of giving Australians greater financial security in retirement.

“The three-pillar policy of the Aged Pension, compulsory superannuation and voluntary savings is working as intended, reinforcing the need to have bipartisan political support for a system that is proving to be one of the most successful economic reforms this country has implemented.”