When it comes to so-called ‘retirement affordability’ the truth of the matter is that we can afford a pension for all.
The subject of retirement affordability is both contentious and confusing. But what is crystal clear is that vested interests continue to propagate the falsehood that the Age Pension is unaffordable. It is not. There are many ways to balance the nation’s books and cutting welfare for those who are most vulnerable is both lazy and unfair.
Recent research released by the Australian Institute of Superannuation Trustees (AIST) that reveals that retirees are heading into retirement with increasing debt should come as no surprise. As YourLifeChoices members are aware, this trend has been occurring for years, and we have noted it time and again in our commentary.
What is worth noting is that yes, the housing affordability crisis is affecting all age groups, so trying to create an intergenerational war between ‘greedy’ baby boomers and poor younger people is neither accurate nor likely to lead to solutions to the real problems behind overheated property markets.
But lurking beneath this debate is an assumption that most commentators rarely challenge, instead choosing to parrot the current government’s preferred narrative, that the Age Pension is unaffordable, unsustainable, and contributes to a debt blowout that will hang like a millstone around the necks of future generations until the end of time (as witness Mr Shepherd’s current comments).
This is simply not true, and should be challenged until we get rid of this falsehood, once and for all.
How do we know this? Let’s go back the Intergenerational Report, an initiative of the Howard government to project future spending and how budgets might be balanced as the population ages. The first of these five-yearly reports was published in 2002 and it charted the percentage of the GDP spent on Age Pensions. In 2002 the Age Pension spending was projected to be five per cent of GDP for 2041/2.
Since then we have had three more reports (2007, 2010, 2015) and in the most recent one in 2015, the percentage of GDP currently spent on the Age Pension was 2.9 percent, and the projection 40 years forward to 2055 was 3.6 per cent. Since then, changes to pension eligibility will have reduced this projected percentage even further.
Yes, you do not need to be a mathematician to see that this percentage will barely change over the next 40 years.
So if there is a debt and deficit crisis (and no one is arguing that our national debt is increasing at an alarming rate), we need to look at other aspects of the national accounts to work out what is going wrong. Why is it always the welfare section which cops the cuts? Why do we create a multi-million dollar Robo debt recovery system to bully older Australians, many of whom actually owe Centrelink nothing? Yet we continue to lack the political will to target large companies who offshore their profits, paying little to no tax in Australia. Access to the Age Pension was tightened in January – a rule change that many pre-retirees were unable to respond to, as there was so little warning. Again, the change of rules on superannuation on 1 July will hit those struggling to manage their transition to retirement options. Why would any pre-retiree have faith in Australia’s retirement income system when the goal posts are moved so frequently?
Worst of all, these changes are based on the indefensible falsehood that Australia cannot afford the Age Pension – despite the fact we are the third meanest country in the world when it comes to Age Pension spending as a percentage of our GDP.
Research conducted by the Australia Institute shows that Australia could easily offer a universal Age Pension – for every citizen over age 65 – by trimming other spending on entitlement for those on higher incomes receiving a plethora of ‘free kicks’.
Yes, footy season is with us again, so let’s kick it off by asking the policy ‘umpires’ to apply the rules more fairly.
What do you think? Is Mr Shepherd right that Australia is being ‘crippled’ by pension spending? Should access to the Age Pension be further reduced?
Related articles:
Busting the biggest retirement myth
Retirement: the risk is all yours
Super-dooper spin
