Pension age limits will rise, and life expectancies may play a role

Experts believe Australia’s pension age will continue climbing, but the pace and how it’s handed out could become controversial.

Retirees are living longer and the pension age is tipped to rise. Picture: iStock

An expected doubling in Australia’s population of over-65s during the next 40 years is sparking fresh questions about the age pension — including whether some people should receive it earlier than others.

A new research paper by Macquarie Business School suggests access to the age pension — currently set at 67 — should not be uniform, and instead vary between the states and territories based on life expectancies.

It found a five-year gap between Australians with the longest life expectancies — people from the ACT — and the shortest life expectancies, Northern Territorians and in particular disadvantaged Indigenous people.

The research also notes that previous government proposals to potentially lift the pension age to 70 by 2035 may be too rapid and not sustainable, and instead it projects a rise to 68 by 2029, 69 by 2037 and 70 by 2043.

Co-author professor Hanlin Shang said the government should raise the pension age in small increments and consider policies to boost fertility “or possibly migration” to maintain an ideal old age dependency ratio of 23, where taxes from every 100 workers funded the pensions of 23 retirees.

“A fair and equitable pension system goes beyond a one-size-fits-all approach,” Prof Shang said.

“For instance, it might allow disadvantaged groups residing in the Northern Territory to access their pensions earlier than more advantaged groups,” he said.

Prof Shang said Australian Bureau of Statistics numbers showed babies born in the ACT today had life expectancies of 81.2 for boys and 85.7 for girls, while in the NT it was 76.4 and 80.4 respectively.

“Because of this disparity in life expectancy, it is financially unfair to impose a universal pension age,” he said.

Prof Shang said he did not believe changing the rules would result in seniors switching states to get a pension earlier.

“Seniors may have established a network of friends and families in their current residential state,” he said.

“It can be difficult to imagine they would opt for moving to another state for the gain in pension amount.” Migration age profiles showed internal movement of elderly Australians was “quite rare”, he said.

Tribeca Financial CEO Ryan Watson said he expected Australia’s pension age to rise in the medium term as people were living longer.

“As our population grows the federal government can’t continue afford to continue to fund the age pension from age 67,” he said.

Mr Watson said he did not believe state and territory life expectancies should change pension ages even though “this might sound harsh”.

“One set of guidelines for the wider Australian population seems fair and reasonable to me,” he said.

The pension age has climbed from 65 to 67 in recent years. Picture: iStock

“For those people that need to access to an alternate source of income in the years before their natural age of retirement, there is the opportunity for them to access some of their superannuation balance.”

Australians can currently access their superannuation from age 60, or earlier if they are suffering hardship.

“I think that the age pension should have equal age qualifications limits across the Australian population,” Mr Watson said.

He said he expected to see more age pension age increases in the next five years.

National Seniors has rejected calls to raise the pension age to 70, adding that many older people exited employment because of ill health that prevented them from working.

It has argued an alternative to dealing with declining workforce participation would be to deliver incentives to people who choose to work longer.

Originally published as Pension age limits will rise, and life expectancies may play a role