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Superannuation: Age old problem looms

Every Issue

Cite as: May 2015 89 (5) LIJ, p.75

The 2015 Intergenerational Report warns that Australians are living longer and someone will have to pay.

Every five years the federal government produces an intergenerational report and the latest release, issued in March 2015, has implications for Australians and their superannuation.

The report evaluates the long-term sustainability of current government policies and how changes to Australia’s population size and age profile may impact economic growth, the workforce and public finances over the next 40 years.

One of the strongest messages from federal treasurer Joe Hockey in the report is that Australia’s population is growing and ageing at such a rate that governments will not be able to continue to support people in the same way they do now.

In terms of how the population and age profile of Australians is expected to change, the “2015 Intergeneration Report – Australia in 2055” (http://tinyurl.com/n9hn365) predicts that by 2054-55:

  • Australia’s population will be 39.7 million, up from 23.9 million today;
  • life expectancy at birth will be 95.1 years for men and 96.6 years for women, compared with 91.5 and 93.6 years today;
  • a greater proportion of the population will be aged 65 and over. The number of Australians in this age group is projected to more than double;
  • the number and proportion of Australians aged 85 and over will have grown rapidly. In 1974-75 this age group represented less than 1 per cent of the population, or around 80,000 people. In 2054-55, it will represent 4.9 per cent of the population, or nearly 2 million Australians; and
  • there will be around 40,000 people aged over 100. This is more than 300 times the 122 Australian centenarians in 1974-75.
  • The areas where change is most likely to occur, with follow-on implications for superannuation, include access to general health services, age and service pensions and aged care funding.

    If government makes cuts and changes in these areas, and there are strong hints they will, then the cost of living for older Australians will rise. We will pay more for health and aged care services, while pensions will be harder to access and the amounts on offer reduced.

    As a result, people will need to have accumulated greater capital through means such as superannuation before they retire to offset these increased costs – or be prepared to accept a lower quality of life, and for a longer period of time.

    Those hoping that a change in government would see these problems disappear may be disappointed as similar themes are contained in two earlier reports.

    In November 2013 the Productivity Commission released its “An Ageing Australia: Preparing for the Future” report (http://tinyurl.com/nc6n2nt).

    The report found that Australia is facing a slowdown in growth in national income per capita and productivity outlook at the same time that ageing will start to make major demands on the budgets of all Australian governments.

    While the report made no recommendations, it outlined areas for policy consideration, including the age pension and the possibility of health care reforms designed to improve productivity.

    Also in November 2013, independent think tank the Grattan Institute explored similar themes in its “Balancing budgets: tough choices we need” report (http://tinyurl.com/l6vfdxx).

    It recommended a reform package which includes raising the age of access to superannuation and the age pension, requiring retirees to draw down some of the value of their homes before accessing the age pension and limiting tax concessions on superannuation for people over 60.

    Add to these 2013 reports comments made by the federal treasurer that canvassed the possibility of allowing people to dip into their superannuation to help buy their first home, and it is apparent that significant change may be around the corner.

    In light of mooted changes, now more than ever it is important that people ensure their financial plans for retirement – whether through superannuation, shares, property or other forms of wealth accumulation – are adequate to meet their needs in an ageing Australia.


    ANDREW PROEBSTL is chief executive of legalsuper, Australia’s industry super fund for the legal community.

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