Age-old collar colour divide a super challenge for Chalmers

Only 13 per cent of blue-collar workers will continue to work beyond the age of 65.

The elephant in the room for the government’s overhaul of super is the great divide among older Australians.

White-collar Australians can retire earlier – but increasingly don’t wish to do so. Meanwhile, the pension age continues to move further out for blue-collar workers who need it most.

The gap between the two groups has become significant: A report from KPMG shows an Australian with a postgraduate degree is more than twice as likely to work beyond the age of 65 than someone who got as far as year 10.

The new KPMG numbers suggest that the expected retirement age for men is now 66.2 and for women it is 64.8 which is the highest in 50 years.

The problem for Treasurer Jim Chalmers and his super review is the yawning gap between the age you can get access to superannuation (the so-called preservation age) which is 59, and the pension age, which moves to 67 from July 1 this year.

Federal Treasurer Jim Chalmers during faces a challenge over super versus pension access. Picture: Gary Ramage

In effect, the gap means there is at least a seven-year trouble zone facing all governments as older blue-collar workers are more likely to use any super they have saved to bridge the years until they can get the pension.

The greatest contrast is between the major cities and regional areas. KPMG director of demographics Terry Rawnsley says Sydney leads the nation with the most older Australians who wish to keep working beyond retirement age.

Rawnsley says there is growing evidence of a reversal of the pandemic trend towards a “sea change” where older Australians left the cities for regional towns. “There is evidence that more people want to stay in the city and they want to work longer when they do so,” he suggests.

The KPMG report shows a two-tier retirement system where white-collar workers want better conditions for working beyond traditional retirement age, as evident by the constant lobbying to improve pension-linked work tests.

Meanwhile, blue-collar workers – especially those with heavy physical duties – are struggling to actually make it to pension age.

A trend towards working longer is linked with longer life expectancy and higher education levels around the world. Australian life expectancy is now 81.2 for men and 85.3 for women.

31 per cent of postgraduates will work beyond 65.

The trend towards working longer took off during the pandemic when 179,000 workers over 55 joined the workforce. The KPMG numbers show, on average, postgraduates retire at over 67, those with a graduate degree retire around 66, and workers who got as far as year 10 retire at over 65. A closer look at the numbers shows more than 31 per cent of postgraduates will work beyond 65 while just 13 per cent of blue-collar workers will do so.

“The economy is slowly becoming more and more educated, which is likely to shift the age of retirement for the whole labour force – a slowdown of the trend is unlikely anytime soon, with tight labour conditions expected to continue,” says Rawnsley.

The figures should give the government breathing space as any move towards average working lives becoming longer will take pressure off pension and super costs in the budget, says Rafa Chomik of the UNSW Ageing Futures Institute.

“It should also ease any pressure to lift the retirement age which had been set to rise to the age of 70 until the Coalition abandoned the issue in 2018,” Chomik says.

About 40 per cent of Australians retire on reaching the eligible age for super but the majority retire for non-financial reasons such as ill health or caring for partners.

Although inflation is rising, Rawnsley suggests that cost of living is not a major factor on whether or not to retire.

Australia’s pension age at 67 from July 1 now sits in the middle of the global range. The UK, Korea and Japan have higher pension age levels while countries such as France and Greece have lower pension age levels.

In France there has been widespread protests and strikes recently as the Macron government tried to lift the pension age from 62 to 64 – three years lower than the age level in Australia.