Retiring at 70? Do you really want to be at the mercy of our government?

Despite compulsory superannuation being around for over 20 years now, every day in this office we speak to people who are approaching retirement inadequately financially prepared, and in many cases relying on their superannuation to pay off debts (the remainder of the mortgage, or car loans, or credit cards). Even those with some leftover are then still relying on the Aged Pension to give them their main income, or at least supplement other sources of income.

It’s not a pleasant conversation to have with somebody who may be 60, or 62, and either physically or mentally exhausted, and tell them that they have to keep on working until the government is willing to support them. Unfortunately many of them seek advice once it’s too late.

The aged pension as it stands today kicks in at age 65. With an ageing population, and more retirees reliant on proportionately less working people, governments have two choices – either lift the taxes of those who work, pay those receiving benefits less, or pay them the same amount for a shorter period of time.

For that reason, the aged pension is now only accessible from age 67 for those born from 1957.

Where will it end?

The Productivity Commission last week announced research supporting an increase to the aged pension to 70 years. (see article below) While it was dismissed by the government (this government) can their findings be ignored by future governments?
What is the answer?

Isn’t it time to take things into our own hands, and be the masters of our own destiny? Sounds quite deep I know, but the many pleasant conversations we have with people approaching retirement are the ones where they have taken action early, had a plan, and eliminated waste and maximised opportunity by taking good advice and guidance. These people have choice – and that is wealth.

(Article courtesy of Financial Standard)

Lift age pension to 70: Productivity Commission

With Australia’s population on track to reach 38 million by 2060, the Productivity Commission has released a research paper that warns now is the time to plan the policy responses that will be needed to cope with these demographic and economic changes.

Population growing to almost twice what it was in 2012 is, however, nothing to be feared albeit it will affect labour supply, economic output, infrastructure requirements and governments’ budgets.
“Population ageing is largely a positive outcome, primarily reflecting improved life expectancy. A female (male) born in 2012 will on average live for an estimated 94.4 (91.6) years,” noted the report entitled ‘An Ageing Australia: Preparing for the Future’.
“Australia’s population is projected to rise to around 38 million by 2060, or around 15 million more than the population in 2012. Sydney and Melbourne can be expected to grow by around 3 million each over this period,” it added.
While Sydney and Melbourne having more than 7 million inhabitants each will shock policymakers it action, it’s among retirees where the biggest changes will happen.
“The population aged 75 or more years is expected to rise by 4 million from 2012 to 2060, increasing from about 6.4 to 14.4% of the population. In 2012, there was roughly one person aged 100 years old or more to every 100 babies. By 2060, it is projected there will be around 25 such centenarians.”
One in four babies reaching the age of 100 will have transformational impacts on aged health care and retirement policy and especially aged pension costs. It also highlights how life expectancy metrics are just projected averages, meaning many people will live way beyond those ages.
“Total private and public investment requirements over this 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century, which reveals the importance of an efficient investment environment,” noted the report in what may be a veiled reference to the just announced Financial System Inquiry.
These pressures could cost 6% of GDP by 2060 and require taxes to increase from 28% to 34% of GDP unless government spending was much better targeted, warned the report.
The PC said the government should consider are eventually lifting the age pension to 70 and introducing better equity release programs so retirees can use their asset base to help pay for their living and health costs.
“Wide-ranging health care reforms could improve productivity in the sector that is the largest contributor to fiscal pressures. Even modest improvements in this area would reduce fiscal pressures significantly,” the report said.
Illustrating the point, the PC report revealed that hospital costs per annum per person for someone older than 85 years are six time that for the average 50 year old.
Showing the timidity of Australian public policy that the PC report was trying to address, the government and unions have already rejected the report.

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