It’s clear: older Australians are the solution, not the problem 7



View Profile

Ageing population: Why older Australians are part of the solution

David Kennedy

In last year’s Federal Budget, Joe Hockey made drastic cuts to the eligibility criteria for the part Age Pension. Consider the couple with a family home and an additional $823,000 in assets. From January 2017 they will forego around $13,524 per year in part Age Pension payments while a single pensioner with $547,000 will lose $9,403 per year. That’s a hefty pay cut. In other words, where the Government believes you have sufficient financial means, you are now on your own.

Last night Treasurer Scott Morrison continued this theme by making sweeping changes to super and pension rules that target the top end and limit the amount wealthier Australians will accumulate in super over their lifetime.

Hockey’s reforms were about reducing growth in government spending on social security benefits, while last night’s budget was about limiting tax concessions on our retirement savings in order to save the federal budget $2.8 billion over 4 years.

Both measures are a response to the financial impact of Australia’s ageing population.

All too often, references to the population ageing describe the demographic shift in negative terms. The proliferation of older Australians is frequently described as a ‘problem’ or a ‘burden’ on the economy based on the outdated assumption that ageing is synonymous with complete cessation of work, subsequent dependence on Centrelink benefits and the absence of any further contribution to the tax base.

The reality is that more than ever, older Australians are a significant and increasingly willing part of the solution to the financial challenges of an ageing population.

I hold hundreds of conversations with over-60s clients every year and there is a noticeable trend away from the traditional notion of retirement at a pre-determined point in time (age 60 or 65) in favour of a more fulfilling and flexible progression from full-time to part-time work that may span an indefinite number of years – often well past age 65.

This is encouraging in light of a recent report prepared by Deloitte Access Economics for Chartered Accountants of Australia and New Zealand that found that a 5% increase in the participation rate amongst over-55s would lead to higher tax receipts, reduced Age Pension spending and a boost to the Australian economy of around $48 billion per year. In the context of the ongoing budget repair effort, that’s a material number!

Last month the Australian Bureau of Statistics confirmed that the this trend is already underway with 66% of 55-64 year olds and 13% of over 65s in work (or seeking work) and these participation rates have been gradually rising over the years. Not surprisingly, a significant number of those in work are employed on a part-time basis which allows them to continue to work while making time for other lifestyle activities.

The motivations clients describe for engaging in part-time work beyond retirement age vary greatly and include the following:

  • Preference for lifestyle flexibility that allows for a balanced combination of work, family caring commitments, travel, hobbies and other community activities.
  • Financial necessity whereby clients may not yet feel they have adequate savings to allow them to stop working.
  • Desire for regular social interaction.
  • Need for ongoing mental stimulation and intellectual challenge.
  • Structure and routine is often highly valued.
  • Some still feel their identity is very much associated with their job.
  • A continuing passion for work or business subject matter.
  • Ceasing work simply feels unnatural or undesirable.
  • Fear of boredom.

While there are many motivations for working past traditional retirement age, many older Australians are willing to continue to work in some capacity provided two pre-conditions are met:

  • Sufficient work opportunities are available – this is easier said than done and is problematic for those in labour-intensive industries. There are far too many over 60s who are willing and able to work who are unable to secure employment.
  • Working conditions are flexible enough to allow them to work on their terms.

There is a lot riding on the creation of new employment opportunities for older Australians. The age of eligibility for the Age Pension is increasing to 67 which means government and the private sector must work together to come up with smarter ways to ensure those who want to work or run their own businesses are able to do so.

Age discrimination is alive and well and while incentives to employ older Australians exist, more creative thinking is needed to ensure a greater number of businesses are motivated to hire workers in their 60s across a range of industries.

As the Treasurer reminded us overnight, Australia’s economic future is at stake. Where older Australians have more opportunities to work on their terms, the size of the prize is up to $48 billion every year.

Now that’s what I call budget repair.

What do you think? Share your thoughts on last night’s Budget and David’s insight. 

David Kennedy

David delivers advisory services to professionals and retirees and specialises in retirement planning strategies, self-managed super, portfolio advice and wealth protection. He recently received the Hillross Adviser of the Year Award.

  1. Bring on voluntary euthanasia. I am turning 60 this year. I was made redundant at 55.5 years. I had saved hard, paid off my house and owe nothing. My financial advisor said I was in the right place to retire from work and concentrate, while I still had a reasonable amount of health, doing the things that I dreamed. 4 years on and my nest egg is dwindling so I can prop up new homes 10 times the size of mine to be built does not impress me one bit. I do not apply for Centrelink and solely fund my own life, any age benefits will be stripped by the time I reach 67 and through no fault of mine (planned savings all my working life). All the rhetoric of older people still working is garbage – a few may be capable of holding down/getting a job, but a majority won’t – and why should we work until we die ?
    And then….and we all know some, who have managed to manoeuvre their lives in the social security system, all their lives, sit happily taking handouts forever.

  2. I wish to know how a person that was a part pensioner make even the full pension wage with the intrest rates so low $823000 mutiplyed by 3 % pnly makes $24690 way less than the full pension how is this good for anybody .

  3. I would have lived tthere have carried on working, even part time, but my husband was diagnosed was th Altzhimers nine years ago when he was 62 I had to leave work because he was no longer able to look after himself, of course because I worked we could noT get anything for him so all of his super went and now I’ve retired and had no where near what was required we have to manage on the pensions and the little that was left of my super, still have a small mortgage and have to keep going, so where do we stand and what happens when I can no longer have my husband at home which is on the horizon?

  4. I would like to visit a point of the economy discussion mostly forgotten. A great number of retired part, or full pensioners are still working, just not paid. They are supplying services to hospitals, nursing homes, schools, community needs, helping keep elderly people in the homes e.g. meals on wheels, small maintenance jobs. Others help with outside school projects, sporting events for children and adults, driving the disabled to appointments, supporting tourism facilities often with much historical knowledge, helping buddy young adults whose language may not be english etc. etc. Do not try and convince me pensioners are a burden. Take away these and many other areas of voluntary work and many essential services for a healthy progressive nation would collapse, as the Government could not, or would not, employ people to replace them. By the way, these people paid taxes all their working life. Fortunately for the nation, they have the generous spirit and enjoy helping others thereby creating better services, and compassionate communities.

    1 REPLY
    • You are correct,,,and carers nursing sick relatives are saving the government $40 billion p.a

  5. Politicians and public servants who say retire at 67 have not physically worked i am 66 and my back is stuffed my neck is stuffed ,my bones ache and i am physically worn out but their mismanagement of our pension fund which they spent the mismanagement of all the assets they sold and spent they have the hide to tell me to keep working, if you were in business that mob in canberra ,your shareholders would sack you but you rig the voting to keep yourself in a job then pay yourself taxpayer funded superannuation and for life pensions .your day is coming to an end

  6. Australia is a democracy and older Australians constitute a significant number of voters. If the majority of voters feel strongly about a change, then a change will be done. No minority groups should ever take anything for granted, but older Australians are a significant demographic group. They have more power than others.

Leave a Reply

Your email address will not be published. Required fields are marked *