Preparing for Retirement

Retirement Income Review

The Treasurer (Josh Frydenburg) announced a review into the retirement income system on 27 September 2019. The review was recommended by the Productivity Commission in its report Superannuation: Assessing Efficiency and Competitiveness. The review also came after the fractious debate in the lead up to the May 2019 federal election about franking credits.

Terms of Reference

The Review will establish a fact base of the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians. The Retirement Income Review will identify:

  • how the retirement income system supports Australians in retirement;
  • the role of each pillar in supporting Australians through retirement;
  • distributional impacts across the population and over time; and
  • the impact of current policy settings on public finances.

The Panel

Chair, Mr Mike Callaghan AM PSM, with two panel members, Ms Carolyn Kay and Dr Deborah Ralston; the Panel to provide its final report to the Government by June 2020.

The Consultation Paper

The consultation paper, 36 pages, was issued on 22 Nov 2019. It covered the three pillars of Australia’s retirement income system, then proceeded to ask what is the purpose of the system, is it adequate, what is meant by adequacy, is it equitable, what is meant by equity, is it sustainable, and finally whether the system is cohesive.

The Submissions

287 submissions were lodged between 22 Jan 20 and 4 Aug 20. Included were submissions from ACPSRO (30 Nov 19 and 30 Jan 2020), the Tasmanian Association of State Superannuants Inc., John Pauley, Superannuated Commonwealth Officers’ Assn. (WA) Inc., National Seniors, ACOSS, COTA and AIR (with supplements from the Noosa and Sydney Hills branches). All of the submissions may be accessed here.

The ACPSRO Submissions

ACPSRO made the following submissions:

  • Submission to the Retirement Income Review (November 2019)
  • Submission to the Retirement Income Review (November 2020)

The Report

The report was released on 20 Nov 2020.  You can get a copy here.

Whilst the report is not of immediate interest to DB pensioners, there are a couple of qualifications:

Firstly, the discussion on P85 ends with:

“Unfunded government schemes carry a risk of governments reducing benefits in the future if the scheme becomes difficult to afford. This is particularly a risk for countries with ageing populations.”

That’s not altogether reassuring !

Secondly, the report could lead to changes to Accumulation arrangements in two respects:

  • Change in the status of the family home. IMHO pretty remote.
  • Change in the taxation concessions for contributions to and earnings of Accumulation balances. IMHO probable as our governments try to recover from the costs of Covid. In which case some kind of equivalent change would be required for DB pensions.

ACPSRO will continue to keep a close eye on, not so much on the report, but rather what develops from it.

Are you eligible for the Aged Pension ?

Your first port of call should be:

Qualifying age for the age pension

From 1 July 2017, the qualifying age for the age pension increased from 65 to 65.5 years.  It will rise by 6 months every two years reaching 67 by 1 July 2023 for both men and women. The changes will be introduced four years after women’s qualifying age for the Age Pension has reached 65, under existing rules (in 2013).

The table below shows the gradual increase in women’s qualifying age for the Age Pension over the period leading up to 1 July 2013, and then the increase in qualifying age for both men and women from 1 July 2017.

You may also find the Commonwealth Superannuation Corporation’s 3rd Act Retirement programme of interest.

 Year born  Women eligible at age Men eligible at age
Before 1/7/1935 60 65
Between 1/7/1935 and 31/12/1936 60.5 65
Between 1/1/1937 and 30/6/1938 61 65
Between 1/7/1938 and 31/12/1939 61.5 65
Between 1/1/1940 and 30/6/1941 62 65
Between 1/7/1941 and 31/12/1942 62.5 65
Between 1/1/1943 and 30/6/1944 63 65
Between 1/7/1944 and 31/12/1945 63.5 65
Between 1/1/1946 and 30/6/1947 64 65
Between 1/7/1947 and 31/12/1948 64.5 65
Between 1/1/1949 and 30/6/1952 65 65
Between 1/7/1952 and 31/12/1953 65.5 65.5
Between 1/1/1954 and 30/6/1955 66 66
Between 1/7/1955 and 31/12/1956 66.5 66.5
From 1/1/1957 67 67