It is a fortunate person who so loves his or her vocation that he/she is willing to keep working at it even after becoming eligible for retirement. The overwhelming majority of people in the paid workforce are not so blessed, and usually cannot wait to retire at age 65, when they become entitled to receive the aged pension, or to access their superannuation accounts. If they could find the wherewithal to do so, many would gladly opt for early retirement.
But just as baby boomers approach retirement, many have been dismayed to find that the finishing tape to their working careers is being progressively moved back. As a result of the global financial crisis, and the havoc it has wreaked on superannuation investments, many people have been forced to put their retirement plans on hold. And this week the Federal Treasurer, Wayne Swan, announced that the qualifying age for the age pension would be increased to 67 years.
Few people predicted the extent to which super funds would be battered by the global financial crisis, but the push by governments to keep people in the workforce longer has been gathering pace for some years, driven by the sure knowledge that the cost to taxpayers of pension and other aged welfare payments is reaching unsustainable levels. The big gains in life expectancy over the past 60 or 70 years (flowing mostly from health and medical advances) are what's behind this potential budgetary crisis. In addition, policymakers believe that the ageing of Australia's population will exacerbate the problem. With the ratio of working-age people to those aged 65 and older forecast to fall from 5:1 in 2007 to 2.4:1 by 2047, future working generations face the prospect of having to foot substantially increased bills for the provision of age pensions, health and aged care. Certainly more than previous generations.
The Treasury Department's second Intergenerational Report identified all these looming fiscal time bombs when it was published in 2007. Among the recommendations it made were to increase the pension age to 67 and the age at which Australians can begin drawing on superannuation, as well as to lift workforce participation and productivity rates. Baby boomers (particularly those feeling their age after 30 or 40 years of manual labour) have reacted indignantly to the prospect of remaining in the workforce a further two years. But the changes are incremental, and not due to begin until 2017, ending in 2023.
However aggrieved or short-changed they may feel, it is fair and reasonable that the generation now approaching retirement age share some of the added costs of health and welfare provision caused by them living longer than previous generations.
That said, government must consider the practical difficulties of requiring that people stay longer in the workforce: one arises as a result of the perception of many employers that 50-year-olds (let along those in their 60s) are ''over the hill'' or incapable of being trained, and therefore to be hired only reluctantly. Some younger people resent the presence of older people in the workforce, regarding them as barriers to advancement or promotion. Extending the retirement age by fiat is one thing; ensuring that older workers do not fall victim to ''ageism'' in the workplace another altogether.
As well as the practical questions, policymakers must also address equity issues. At present, superannuation rules allow people to dip into their savings before the age of 65, and though access rules are being tightened, these individuals have far more options for early retirement available to them than those with inadequate superannuation savings of their own (among them women whose careers might have been interrupted by the birth of children).
It was precisely to relieve government of some of the pressure of providing the age pension (and to increase the national savings pool) that the Hawke Labor government introduced a national retirement income scheme in 1986, when a 3 per cent employer superannuation contribution was negotiated in lieu of a wage rise under the second Accord. In 1992 that government went further by legislating to phase in rises to the employer contribution, or superannuation guarantee levy, which took it to 9 per cent by the time, its architect, Paul Keating, left office in 1996. In the 1996 budget Labor had proposed that the levy should rise to 12 per cent, but the Howard government subsequently redirected the extra 3 per cent into tax cuts.
In retrospect, the Coalition's failure to increase the levy in a period of unprecedented national prosperity was short-sighted and ill-advised. Keating says that had the levy been lifted to 15 per cent (as he has long advocated) Australia would not now be facing a looming pensions crisis.
While it would be difficult to argue for an increase in the levy in the short-term while businesses are struggling, policy-makers should not rule it out when economic circumstances improve.
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