Ross Greenwood discusses with Ian Yates, CEO of COTA, about the realities for the aging population as 70 years of age will be the new retirement pension age soon.
Introduction: Is 70 the new retirement age?
Ross Greenwood: Welcome back to Work. Life. Money right around Australia. What age is old do you think? It’s not a bad question to ask. Because the age that you’re at right now, doesn’t matter whether you’re 70 or 30. You’re probably sitting there and thinking, “No I’m not that old, I’m actually quite young.” That’s in the mind in many ways about attitude. Am I old, am I young, what’s the whole point? The government’s trying to work this out itself and has been for quite a long time.
With the record ageing of Australia’s population, it’s trying to figure out economically, what can we afford to pay in pensions to aged Australians? As compared with, what is needed by those aged Australians? Was there a reality for them during their lives to make certain that there is no hardship to them? But then also no hardship to the economy overall? Because the ageing and the population we know, is one of the great burdens or drains potentially, on an economy going forward. Ultimately if you don’t have enough young people in the workforce, generating the taxes, it’s going to cause a real economic problem.
As you may be aware in the very first Alberta Hockey budget, they put in a measure to extend the rising of the pension age. I should make a clear distinction here. The age at which a person can gain an age pension, is not necessarily the retirement age. Some people choose to retire earlier, others choose to retire later. It is their absolute right to do so. For many people listening to this right there you might say, “This is something for old people. This is not for me. I’m only in my 40s, I’m only in my 30s”. Absolutely wrong, it is about you. The reason for it is, say for example, a person born in 1958. They will have the ability to retire at around the age of 67, 67 and a half.
In other words that person right now is 57. But a person who is now 47 years old, born in 1968, they will have to stay in work for another two and a half years at least. Their age of retirement, or to be able to gain the pension will be 70. Whether that gets to the legislation throughout parliament is not the matter. Life is all a puzzle. The man who is perfect to talk to about this, is the Council on the Ageing Chairman Ian Yates. He’s on the line. Many thanks for your time Ian.
Interview with Ian Yates, CEO, COTA
Ian Yates: Thank you, Rob.
Ross Greenwood: I’m trying to set this up. This is a real issue because for many Australians, the prospect of trying to work until 70 is a near impossibility. Because of physical constraints or because they’ve been thrown out of the workforce and simply can’t find the work.
Ian Yates: Yes, increasingly, it’s less and less people who cannot work, because of the nature of the job. An important thing to say is if that is the case, if you actually can’t, the disability support pension is there for people like that. That is the same value and the same conditions as the age pension. That’s important. But the second half of that is really important. At a time when more people are wanting to work longer for all sorts of reasons- some it’s because they’d like it, some it’s because they financially really need to for all sorts of reasons. Like they still might have more coats, they might still be putting kids through university.
Those people want to keep working and they experience discrimination. It’s not a majority of people in the workforce, but it’s a very significant minority who experiences age discrimination.
Ross Greenwood: I mentioned earlier on, that this proposal from that regional Alberta Hockey Budget, to raise the pension age to 70, from where it sits right now at around 67. It has not yet gone through our parliament. Labor says it will oppose the measure. Where do you sit in regards to this?
What the retirement age should be is a community debate
Ian Yates: Where we sit is to say, what the retirement age should be is a community debate. Labor decided to move it from 65 to 67 a few years ago and we’ve just started that process. We had to wait actually until we got women after 60. Because that used to be 60, and then they moved over a decade to 65. We’re moving up to 67 anyway and that as you said will affect a lot of people. Other countries have different ages, no one else is at 70. Some are at 68, 69. So it is a debate. Let us think about the fact that we’re living a lot longer, that people are going to have multiple careers.
In a working lot, people will have higher expectations of what they want to do post their full-time working years. So it’s not in itself an unreasonable idea that the pension age might go up. When we set it at 65, when not many people got there.
Ross Greenwood: There’s balancing act here. Is that the government will prefer a person that basically, spend their superannuation order. Live off this superannuation. Then when one set runs down, they start to bring in the age pension to top it up, to make certain the lifestyle doesn’t diminish too much. This also is a bit of a problem. Because if a person gets there too early, spends their superannuation and falls back on the age pension, that is precisely what the government does not want.
Ian Yates: That’s true. The preservation age you know is moving up to 60 itself. But that means that someone could retire from the workforce, even if there was part time access their super and live off that for some years. Before they then went back to being pension eligible and that doesn’t achieve the government’s purpose. We have said that for a long time, these are very complex and inter-connected issues. We need a comprehensive look at it. No other thoughts coming through this point of time.
Ross Greenwood: I’ll tell you one interesting thing and I mentioned this in the introduction. Most people think all that’s something that an old person has to deal with. Somebody in their 60s, or 70s has to worry about this. This is actually a fundamental problem for a person who’s in their 30s or 40s. They’re the one who is going to make certain that they’ve already got enough money set aside, to live off once they turn 60, 63, 64 to get until age 70. Or alternatively, they’ve got to try and plan themselves to work all the way through until 70.
Of course with the varying degrees of job certainty in a very fast moving economy these days. That’s not something you can necessarily guarantee for yourself.
Ian Yates: No, it’s not. Although one of the other things that it does emphasize– it’s good to think about younger people thinking about their income, over their whole life. It is the importance of investing more into super earlier in your life. I know that’s not always easy. But the more you can set that target and achieve it, with the miraculous effect of compound investment in earnings on that over time. It’s the amounts you put in early, that really give you significant claim later on. Of course a lot of people can’t do that and then they try and top up in their later use, so that they don’t have more than the pension in their retirement.
A lot more people, of course, in the age groups you’re talking about are going to come into retirement with a large ton of earning at least to compulsory super at higher rates, even I will have done. It means that people are going to have more resources in retirement. But they do need to think about what it is that they want and what they’ll need and plan for that earlier on.
What happens to those people who’re physically unable to work
Ross Greenwood: There’s going to be a change in the mindset of the community. You talked about the discrimination earlier. I notice at the social services ministry Christian Porter, this is not an unreasonable thing to say. But it’s whether it is the reality of the way in which people live their lives these days. This is as we live longer, and are healthier, it’s reasonable to expect more people will want to remain active through work. That’s at face value a very reasonable statement to make. The problem is, what happens to those people who’re physically unable to work. As you said there’s a disability support pension. Or through discrimination in the workforce can’t find the work that they require to pay the mortgage, to keep their lifestyle going. All that’s happening.
Ian Yates: I agree with that. I think that we haven’t seen enough focus on that. The government currently has a number of programs aimed at improving workforce opportunity for mature age workers. Probably more programs in process are being developed than we’ve ever had before. They’re all reasonably small-scale so the test will be, if they work will they invest more heavily in them. But what we’re missing is government taking a bit of a lead, on that positive attitude towards older Australians.
Tackling age discrimination both in terms of outlawing it and putting pressure on people not to do it. But also, building up the understanding of the value of older Australians. We’ve seen government campaigns in the past around people with disability and people with mental health issues. We need to see that kind of leadership from government in terms of age discrimination and the value of older Australians to the whole community.
Ross Greenwood: The interesting side about this is, it’s suggested that 375,000 Australians now in their late 50s, so listen up. That you are the ones who’ll be immediately having to work longer, beyond 67 if this legislation gets through. Those people born earlier, who are now maybe in their 60s, might have to keep on going until that age of 67. Until you are eligible for an age pension so what does that say? You’re either got to have plenty put aside. Or for many people, you’ve got in these adverse circumstances for ageing Australians, try and work longer as well.
A man who is always very knowledgeable on this. The chairman of the Council on the Ageing, Ian Yates, we appreciate your time.
Ian Yates: Thanks, Rob.
Other articles relating to the retirement pension age:
Interviewed –Professor Deutsch, Senior Tax Council, Tax Institute–titled ”-The new world of superannuation
Interviewed –Karen Chester, Deputy Chair, Productivity Commission–titled ”-Shaking Up Superannuation
Interviewed –Michael Rice, CEO,Rice Warner–titled ”-How important is insurance to your superannuation?
Interviewed –David Elia, CEO, Hostplus–titled ”-Is your super fund taking your money unnecessarily?