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Access to superannuation & retirement age

The Tax Review report on the retirement income system  recommends retaining a means-tested Age Pension, retaining compulsory savings for retirement at 9% and allowing (!) voluntary savings for retirement.  It  however recommends  increasing the age of eligibility for the ‘Age Pension’ pension to 67 years and moving the age of eligibility for superannuation (the ‘preservation age’) gradually toward 67 years also.  The report is here.

Increasing the preservation age is a significant change since it would, with currently envisaged changes, increase the preservation age from a minimum of 55 to a minimum of 67 years.

Superannuation is a tax which shifts income from early in a person’s life to later.  The need for this forced savings was once seen to be the existence of a publicly-provided ‘Age Pension’ which provided disincentives to save. 

Superannuation is not anything close to an ideal arrangement since, without perfect capital markets, it necessarily distorts an individual’s desired lifetime pattern of savings which might include paying early on for lumpy items like housing and children’s education costs. But like many who initially criticised the idea I have come to accept its reality and learnt to live with it. 

It is outrageous that bureaucrats, who promoted superannuation as forced savings, are now seeking to use the resulting accumulated savings to direct people on their retirement age decisions.

The preservation age for superannuation is already scheduled to shift from 55 to 60 years. The ‘Review proposes increasing this to 67 years. A shift from age 55 to age 67 adds 12 years extra time spent in the workforce for people who, if they commenced work at age 20,  might only seek to work for 35 years in total. Potentially this is an enormous slug and an unwarranted intrusion into the intertemporal work-leisure choices of many.

Some of my friends retired at age 55 and have taken the opportunity to travel or reduce their golf handicap. In some cases this has involved a financial sacifice but they really value their leisure. Other work-aholic types make it clear that they will stop working when their heart stops ticking.  To these people the idea of not working is anathema.

The retirement decision is a personal choice and, if self-funded, one that is of no concern to Canberra bureaucrats irrespective of issues associated with greater longevity and  aging populations.  Meeting future pressures from an expanded class of retirees can partly be met by encouraging them to voluntarily work harder to increase their incomes.  This won’t be met by increasing to 50 cents in the dollar the cutback to pensions when paid work is done that was announced in the recent budget.

People who pay their way should as far as possible be free to choose their lifestyles and when they choose to work or take retirement. This should not be a concern of government.

4 comments to Access to superannuation & retirement age

  • conrad

    It’s all very well to say that, but given that superannuation gets such a low rate of tax, I really don’t see what they can do about it apart from that. In case they want to tax super contributions more like, say, company tax, then I’d believe differently. My personal preference is to scrap compulsary super altogether. There are lots of whinging old people out there that could do things like reverse mortgage their houses, so I don’t see the problem of pensions as nearly as bad as many people make it out to be. This will be further solved by the move to change the pension age to 67 (which has already happened in Germany) which will no doubt increase to 70 in the further future. That should cut pension expenses by one third if the average of death is 80.

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  • Excellent site, useful information thanks …

  • Lakenya Keough

    Retirement is of course inevitable and we should always prepare for our retirement age. We should always get health insurance as we age. .””.’

    Till next time“>

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