“Building on the move by the former Government to increase the pension age eligibility to 67 by 2023, this Government will gradually increase the age of eligibility to 70 by 2035. That is over two decades away.” Joe Hockey, the Treasurer of Australia.

The eligibility for the age pension will rise to age 70 by 2035

The cold hard maths of this move was explained by the Actuaries Institute which calculates the cost of the age pension would rise from the 7.6 per cent of GDP (2010 figures) to 13.3 per cent in 2050 unless this change was made.

However, the social impact of the decision is likely to be debated for years.

Research from the Australian Institute of Superannuation Trustees estimates up to 40 per cent of Australians retire involuntarily with ill health. Its research shows low income earners are more likely to be in this group and that they are also more likely to struggle to work for longer or to find work. Tom Garcia, chief executive of the AIST, said a comprehensive review of the age pension was needed rather than a quick fix. On this theme the Association of Superannuation Funds of Australia called for the health status of workers in their 60s to be taken into account.

Matt Linden, director of public affairs at Industry Super Australia, said there were many other ways to tackle the affordability of the age pension and that these should be exhausted before increasing the pension age to 70.

“It simply asks too much of workers in manual occupations who have been earning and paying taxes since their teens to continue working to 70,” he said.

In a further change the government said that the pension asset test and income test thresholds for the age pension will be fixed for three years from July 2017. After this date the government will link pension increases only to inflation rather than average weekly earnings.

The AIST said this change will most likely lead to significantly lower pensions over time.
Incentive payments of up to $10,000 will become available to businesses that employ an Australian over the age of 50 who has been on unemployment benefits or the Disability Support Pension for six months.

ASFA was supportive of the initiative, which will help people work for longer and accumulate greater superannuation savings, but it said a more radical overhaul of work practices was needed to improve the employment rates of those over 50.

The Superannuation Guarantee (SG) will rise from 9.25 per cent to 9.5 per cent on July 1, 2014. It will remain at this level until 30 June 2018 and will then increase by 0.5 per cent each year until it reaches 12 per cent in 2022/2023

This has been much criticised as potentially denying some savers ten of thousands from their final retirement balance, but some were grateful for the government for allowing the planned July increase to go ahead. Others pointed out the disconnect between limiting personal savings and the greater reliance this would cause on the age pension, though for the government the measure is largely about limiting the amount of tax concessions it hands out.

The $5.9 billion Asset Recycling Initiative will encourage state and Commonwealth governments to sell off established assets.

Industry Super Australia predicted this would lead to an extra $15 billion of investment invested by industry super funds. ASFA estimated the initiative would raise investment from $70 billion currently to $200 billion by 2025.

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