Fewer pensioners in future as super kicks in

AUSTRALIA’S age pension appears under increasing pressure. Seniors are living for longer while the workers who pay taxes that fund pensions are a shrinking proportion of the population.

It might worry people that the money tap will run dry, but finance specialists say the future looks safe.

They say the growing size of superannuation nest eggs will ease the strain on the public purse, and future governments have plenty of options to tweak the pension system. This tweaking has already started and could lead to part of the family home being included in age pension assets tests.

Government data shows almost 80 per cent of retirees received a full or part age pension in 2016-17, with only 21 per cent fully self-funded.

Planning for Prosperity financial adviser Bob Budreika said fewer people had been able to access the age pension since the Centrelink assets test changed in 2017.

“A lot of people became self-funded retirees, not because they wanted to but because the government reduced the benefit,” he said.

“I believe that ultimately the government will assess a person’s home as an asset, as they do for aged care.”

Such a move would be unpopular but would stop people living in milliondollar homes from receiving a full age pension. “It does become ridiculous having someone with a substantial asset and relying on a source of income from the government so the kids end up with the house tax-free,” he said.

Mr Budreika said there could also be stricter super access rules that locked money into an income stream, paying regular instalments.

Financial strategist Theo Marinis said the age pension would always be available, but fewer people were forecast to be receiving it by 2050 “because the super system is working”.

But will retirees want more? The pension currently pays a single person

‘A lot of people became self-funded retirees ... because the government reduced the benefit’ Financial adviser Bob Budreika

$926.20 a fortnight, including supplements, or $24,081 a year. A couple combined receives $1396.20 a fortnight, or $36,301 a year.

“The Depression generation was frugal,” Mr Marinis said. “Today’s generations were brought up in much more affluent times and our expectations are different.”

A report last year by the Actuaries Institute says the cost to the government of continuing the age pension in its current form is projected to reduce as a percentage of the economy, from about 2.7 per cent of GDP in 2017 to about 2.5 per cent of GDP in 2038.