Warning on Age Pension and preservation ages

A key industry superannuation fund group has urged the Government against raising the Age Pension eligibility age beyond 67.

The Australian Institute of Superannuation Trustees (AIST) has used its pre-Budget submission to make clear it does not support any further raising of the Age Pension eligibility age beyond age 67 claiming that the nation’s retirement income policies must recognise that many individuals will have a different work pattern and may not be in a position to work until age 70.

It pointed to research conducted by the Australian Centre for Financial Studies and AIST in 2014 that found that up to 40 per cent of older Australians do not get to choose when they retire due to a range of factors, notably age discrimination, ill health, poor English proficiency and caring demands.

The submission suggested that further research into involuntary retirement should be prioritised and more policies were needed to address work issues impacting on older, vulnerable Australians.

“For similar reasons, we do not support any changes to super preservation age levels (which currently range from 55 to 60 years),” it said. “Raising the age at which people can access their super could see the level of involuntary retirees blow out to more than half the Australian workforce.”

“Maintaining the preservation age for those who retired involuntarily could play an important role in funding the period between when involuntary retirement occurs and the Age Pension is available,” the submission said.

“We note that in previous reviews, the Productivity Commission has acknowledged that changing the preservation age won’t help those who currently retire involuntarily and will lead to only a marginal 2 per cent increase in the overall workforce participation rate.

“We question the benefit of such a policy change that will only make it harder for a significant number of vulnerable older Australians to access their own super savings.”

The submission said additional research conducted by the Australian Centre for Financial Studies and AIST in 2013 noted that scope exists for measures that could be undertaken in order to provide incentives for those who wish or are able to defer retirement, including modifying the means test, or offering actuarially fair compensation for the deferral of pension income.

“AIST recommends that the proposed increase in the Age Pension age to 70 be formally ruled out,” it said.