Lift inadequate allowances and fix unfair super before you raise pension age: ACOSS

22 November 2013

The Australian Council of Social Service says it opposes any suggestion of lifting the pension age to 70 until working age payments are adequate and superannuation tax breaks for older people are delayed and reformed, following the release of today’s new Productivity Commission report, An Ageing Australia: Preparing for the Future.

“We agree that there is a problem, however the solution lies elsewhere,” said ACOSS CEO Dr Cassandra Goldie. “The real problem is the enormous difference between pensions and allowance payments, the ability of people to take their super at 55 years of age and our unfair and wasteful super tax concession system, which is skewed to people on higher incomes.”

“We understand that we face a budget challenge and to fix it Governments will have to re-balance their budgets – to restore public revenue, remove wasteful and poorly targeted spending and replace it with overdue action to close the major gaps in the community’s social safety net.

“The gap between Newstart Allowance and the Aged Pension, for instance, is now $150 per week and this difference will continue to grow because they are indexed differently. We see this as a necessary first step before we contemplate a further increase in the pension age that would condemn many more people to poverty in their later years.

“Above all we need major reform of Australia’s retirement system. A fundamental problem is that people can retire on super at 55 or keep working and pay tax at just 15 per cent by churning their wage through super accounts. This is the rort, not the age pension.

“It is not acceptable for a 55 year old unemployed person with a disability to be forced to live on $35 a day for up to another 3-5 years while their well-off neighbour of the same age can reduce their tax rate from 45% to 15% by churning their wages through their super account.

“The fact is that one third of all tax breaks for contributions go to the top 10 per cent of wage earners, earning more than $100,000, a significant proportion of whom wouldn’t be entitled to the pension in any event and will save for retirement with or without tax concessions. There is an inbuilt bias in favour of higher earners and is simply unsustainable due to its ballooning cost (now $32 billion per year). The Treasury estimates tax concessions for private super will soon exceed the age pension.

“We also need to address the many barriers to workforce participation for older people and do more to enable older people the flexibility to stay in paid employment. This requires a focus on addressing age discrimination in the workplace and the community and looking at strategies which enable older people greater flexibility in the workplace as they grow older.

“We need a national debate about what are reasonable community expectations of government and an inclusive and considered process to make the long term structural changes we need to make as a nation. This should involve a preparedness to put all issues on the table.

“We hope the up-coming tax reform process announced by the new federal Government will allow all these issues to be laid out so we can begin the work of addressing our longer term fiscal challenge,” Dr Goldie said.

Media Contact: Fernando de Freitas 0419 626 155