As access to the Age Pension is tightened, a generation of older Australians’ retirement prospects are reduced to rubble. The 300,000 who will lose entitlements on January 1, 2017 due to asset threshold cuts, with 100,000 losing the pension entirely are proof of this restricted access. But how fair is this new legislation? And why should we adhere to the century-old proposition that the one pension age remains fair to all?
These are the questions raised by visiting academic Professor Chris Phillipson from the Manchester Institute for Collaborative Research on Ageing at the University of Manchester. While visiting Australia, Professor Phillipson has presented at a superannuation conference hosted by CEPAR at the University of New South Wales and, more recently, at the Brotherhood of St Laurence in Victoria.
Professor Phillipson is a sociologist and world expert on the transition from work to retirement as well as an advisor to the British Government on matters related to work and retirement. It is his contention that less well-off retirees are actually subsidising those from a higher socio-economic level. And that this may be inherently unfair.
How could this change, you may ask?
It comes down to life expectancy, a subject recently highlighted by YourLifeChoices where we confirmed that the rich do indeed live longer than the poor.
So when a discussion of life expectancy is linked to pensions, Professor Phillipson maintains that this is where problems of ‘one size fits all’ state pensions are revealed.
Not only is employment becoming more precarious, largely due to an increasingly casualised workforce and the automation of many jobs, but the long-term health challenges of older adults reduce the possibility of secure income.
With less chance of maintaining longer term full-time work, many older adults are not able to remain employed until 67 (the planned retirement age in Australia by 2023), let alone 70 (current Coalition government ‘zombie’ legislation due to be re-presented in the Senate).
If you are in the highest socio-economic group, your life expectancy after 65 is 85 for males and 87 for women. If you are in the lowest socio-economic group, your life expectancy after 65 is 81 for males and 84 for females. So for every year the lower socio-economic group is not claiming an Age Pension, these funds are available to continue paying a pension to the longer lived – the better off.
And this is why Professor Phillipson suggests it may be fairer to consider varying the age or access to state Age Pensions, based upon professional or occupational history and sectors.
He maintains that raising the pension age unilaterally may reinforce social inequalities, as those with the least need for such a pension are most able to remain in the labour market.
It may also reinforce health inequalities, with ‘job lock’, where those with health and other problems are forced to remain in the work place.
Income inequalities may also occur when extended working lives creates a larger labour pool, with subsequent lower wages, contributing to a wider income gap between the rich and the poor.
When Australia legislated a universal Age Pension in 1908, it was described as a ‘reward for service’. It remains a major pillar of retirement income, but is increasingly under assault from governments keen to balance the books at any cost.
So maybe the answer is not to restrict access for all to a later age, instead to lower the age of access to match the ability of manufacturing workers and those with chronic health conditions to secure employment? To make the Age Pension a real safety net for those in need.
What do you think? Is a one size fits all pension still the way to go? Or should the access age be tailored to individual circumstances?
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Retirement planning disconnect
