The life expectancy projections of the Productivity Commission that are motivating the Coalition to curb the $40 billion per annum expenditure on age pension income and associated concessions, should be considered to be a worst case scenario for the government.

Their report tabled in parliament after the recent election, provides the rationale for the Coalition’s intent to lift the Pension Age to 70. The government is also set to announce in the forthcoming May 13, budget cuts that will come into force immediately, to reduce spending on aged care, and require the elderly to use equity in their home to meet some of the costs of institutional management.

The Productivity Commission envisaged Australia’s population would climb to 42 million by 2060, and that the life expectancy at 65 would be 29 years, instead of the present 19 years. Thus life expectancy at birth would rise by about a decade from about 82 for males and 84 for females, to about 92/94 at 2060. As claimed by Treasurer Joe Hockey it is possible then that 1 in 3 children born would live over 100 years.

In making these predictions I understand the Productivity Commission ignored more conservative estimates of longevity by the Bureau of statistics. They made the reasonable assumption that the current rate of increase in life expectancy would continue in the future instead of plateauing as the Bureau of Statistics considered.

Certainly there has been an incredible improvement in life expectancy over the last century from when it was under 55 for men, and about 59 for women.

Some reasons for the rise:

• An improved standard of living and better hygiene. Other public health measures are better awareness of the health risks of smoking and drug usage, wiser dietary habits, and effective vaccination programs.
• The advent of antibiotics stopped people from dying so often of various infectious diseases, although the emergence of drug resistant bacterial strains is threatening the efficacy of some antibiotics.
• Better obstetric care, higher standards of medical and surgical training, vastly superior diagnostic, surgical, and therapeutic equipment have improved outcomes.
• New more effective techniques for treating cancers, coronary artery disease, stroke, organ failure etc.

Whatever the estimates of life expectancy,  there is still a strong case for reducing welfare expenditure. The problems with  lifting the Pension Age from 65, and beyond Labor’s 67 target to 70 are many:

• it will be politically difficult
• the capacity to work of the elderly is not uniform
• the government must depend on industry coöperation
• there is a risk that employers will exploit the elderly with lower pay, and that work-place standards will be inadequate.
• creating work opportunities for the elderly may put at risk jobs for the young, and unemployed
• it denies the elderly from greater leisure, a right they have earned with a life-time of paying their taxes.

A better approach for a Coalition government would be one that would provide incentive to continue working part-time to an extent consistent with work availability and their work tolerance.

At present to qualify for the pension one must be both over 65 and no longer working. By retiring they may forego the opportunity for part-time work. Once retired, it is difficult to find work again.

Furthermore they are trapped into working for at best half their salary, since for every $1 above the full pension threshold they lose 50 cents in pension payments. Designed to reduce government costs, it effectively channels industry funds to government coffers. Would you be willing to work for half-pay when all your costs are based on the minimum wage of the fully employed? There are many reasons why continued employment may be unattractive in addition to poor remuneration. Diminished status, work-related symptoms such as pain, fatigue, difficulty concentrating and memory lapses. I do not believe retirees should be coerced to work against their inclinations.

I believe that the Coalition would be better served by providing the present pension concessions when transitioning to  part-time employment preferably from the age of 60.  The pension income payment could be phased in as the salaried income declines. This is a policy that could continue to provide incentive to work regardless of age for those who are wiling and able to stay in the work force.

The politics of envy intrude strongly when it comes to the arguments between those relying on the pension, and those who have the income and the thrift to largely provide for their own retirement. This is unfortunate. To my way of thinking it would be reasonable to ensure a pension or part pension payment for all, and to rely on income tax to meet equality considerations.

L

Categories: Community Issues, Super Sense, Superannuation