The Morrison government has reassured voters that the Age Pension is “here to stay”, in an attempt to allay lingering fears in the lead-up to the federal election.
The Age Pension has been the backbone of Australia’s retirement system since its introduction in 1909, just eight years after federation.
But decades of successive cuts and freezes to the Age Pension, as well as unclear messaging, have made many Australians wary of relying too much on it in retirement and seeded doubts that it will exist in the future at all.
There are concerns that these worries have led to many living unnecessarily frugal lives in retirement for fear of needing their nest egg one day.
Read: Age Pension mistakes that will hurt your retirement
“Clearly we must do more to reassure all Australians that this concern is unfounded,” federal Treasurer Josh Frydenberg told the Council on the Ageing (COTA) Australia National Policy Forum.
“The Age Pension is well targeted and sustainable and will remain a key pillar of our system for generations to come.”
But still the nagging idea persists in the minds of Australian voters. Unclear messaging on the subject from both sides of politics has not helped the situation either. Despite saying otherwise, both major parties have indicated a strong desire to remove people from the Age Pension.
Comments regarding another pillar of Australian retirement – the superannuation system – have understandably led many to question the future of the Age Pension.
In 2020, after the last federal election, Liberal senator Andrew Bragg called for a major overhaul of the superannuation system in order to get people to stop claiming the pension.
Read: How your superannuation affects the Age Pension
“The government and the superannuation system should be aiming to have half of the population off the Age Pension in 30 years,” Senator Bragg told the Financial Services Council. This is despite having opposed the legislated rise to the super guarantee.
“If we’re going to put 10 per cent of people’s salaries and wages into super, then we want to see half the population off the pension.”
Despite the Age Pension being a Labor creation back in 1909, it seems the modern incarnation of the party has also had goals to reduce the numbers claiming the Age Pension.
“It [superannuation] will deliver a dignified retirement for millions of Australians and, over time, dramatically lessen dependence on the Age Pension,” former Labor treasurer Wayne Swan said in a statement.
“It’s already delivering pension and lump sum benefit payments of more than $40 billion a year, just shy of the $45 billion spent on the Age Pension.”
Read: Rising costs wipe out Age Pension increase
But in July, the federal LNP government introduced to parliament the Social Services Legislation Amendment (Portability Extensions) Bill 2021.
Ostensibly aimed at extending Age Pension coverage for those living overseas, the government voted against an amendment proposed by Labor MP Linda Burney that called on the government not to introduce cuts to the pension.
“Pensioners won’t forget this government’s record on cutting the pension,” Ms Burney said in her speech to parliament.
“The Liberals and Nationals are obsessed with cutting the pension, attempting to cut the pension in every budget, every year.”
With the looming federal election, financial experts say either side of politics proposing to abolish the Age Pension would be political suicide.
“An ageing Australia means that any political party that tries to reduce or abolish the pension can expect to be punished at the ballot box,” says Brendan Coates, economic policy director at the Grattan Institute.
“I think [that fear] comes from 25 years of people being told that super’s purpose is to replace the Age Pension and that the Age Pension is unsustainable.”
Would you vote for a party that proposed dropping the Age Pension? Do you think future generations deserve to have the Age Pension to rely on? Let us know in the comments section below.
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