Intergenerational report: aged pensions face cuts

THE federal government is aiming to cut the number of people of aged pension age receiving the pension.

THE federal government is aiming to cut the number of people of aged pension age receiving the pension from 70 per cent to 67 per cent over the next 40 years as it confronts an ageing population.

The intergenerational report released today argues that without reforms to the pension, spending on the benefit will rise from 2.9 per cent of Gross Domestic Product now to 3.6 per cent of GDP in 2054-55.

The government wants to raise the aged pension age to 70 by July 1, 2035, compared with Labor’s legislated rise in the pension age to 67 by 2023.

With that policy and lower indexation rates for pensions, the IGR predicts spending on age and service pensions will fall from 2.9 per cent of GDP to 2.7 per cent in 40 years.

The IGR predicts the number of people aged over 70 will almost triple over the next 40 years, reaching around 7 million people by 2055.

Under proposed policy scenarios Australian government aged care spending is projected to rise from 0.9 per cent of GDP to 1.7 per cent of GDP in 2054-55, a rise of $80 billion in today’s dollars.

The number of people aged between 65 and 84 is projected to rise from 3.1 per cent now to 7 per cent in 40 years. While people aged over 85 will rise from 0.5 per cent of the population now to 1.9 per cent in 2054-55.