Age pension under pressure – should retirees be panicking?
Australia’s age pension is under increasing pressure as seniors in the present have longer lifespans while the workforce that pays the taxes that help fund pensions is a small part of the population.
While it is concerning, finance specialists say the future looks to be stable.
According to the experts, the growth of superannuation nest eggs will continue to benefit the public, and governments in the future will have plenty of room to change the pension system to ensure the money is going to those who truly need it.
The change has already begun with the family home being potentially included in age pension assets tests.
Government data has revealed that almost 80 per cent of retirees were recipients of a full or part age pension in 2016-17, with 21 per cent fully self-funded.
Bob Budreika, financial advisor for Planning for Prosperity, told the Daily Telegraph that ever since the government became stricter with the Centrelink assets test in 2017, fewer people had access to the age pension.
A lot of people became self-funded retirees, not because they wanted to but because the government reduced the benefit,” he says.
“People will have to be more self-reliant. I believe that ultimately the government will assess a person’s home as an asset as they do for aged care. They will nibble away at the benefits — I think they will be forced to.”
While the move will prove to be unpopular, it would restrict those who live lavish lifestyles from receiving a full age pension.
“It does become ridiculous having someone with a substantial asset and relying on a source of income from the government, so the kids end up with the house tax-free,” Mr Budreika said.
However, he also believes that Australians would not let seniors suffer.
“In this country we do have a social conscience.”
Accessing your super may become a little more complicated – such as locking part of peoples’ nest eggs into an income stream paying regular instalments.
Currently, seniors are able to withdraw all of their super, spend it in one go and then proceed to live off their pension.
“It’s easy to say we will spend $30,000 or $40,000 on a cruise and then later say, ‘Oh shivers, we should have been more frugal.'”
According to financial strategist Theo Matinis, age pension would never be completely obsolete, but fewer people would be receiving it by 2050 “because the super system is working".
But the question remains whether retirees will demand for more? With the pension currently paying a person $926.20 a fortnight, including supplements, or $24,081 per annum, a couple would expect to receive $1,396.20 a fortnight, or $36,301 a year.
“The Depression generation was frugal,” Mr Marinis said.
“Today’s generations were brought up in much more affluent times and our expectations are different. However, human beings are adaptable.”