Working beyond the traditional retirement age

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Australians enjoy some of the longest lifespans in the world but with that comes new expectations.

Australians are living longer than ever before but rather than enjoying a longer retirement, they face spending more years in the workforce.

Comparatively few people received the government Age Pension when it was introduced in 1909 given male life expectancy at birth was just 55 years of age and the pension age was 65. Medical advances and better health care means an Australian male born today can expect to live for 91.5 years, ranking equal first in the world, according to the 2015 Intergenerational Report.

The result is an ever-increasing demand on the public purse with around 2.5 million people receiving some form of Age Pension, according to actuary Michael Rice. This has prompted the government to encourage older people to continue working, but it’s also raised questions about whether that’s fair or even practical.

Challenges for older workers

Workplace discrimination remains rampant against older Australians despite laws designed to protect workers. Almost one-third of Australians perceived some form of age-related discrimination in the last 12 months, even as early as 45 years of age, according to a 2017 study by the University of South Australia.

“The most common form of perceived discrimination was negative assumptions about older workers’ skills, learning abilities or cognition,” researcher Justine Irving wrote at the time.

Meanwhile, more than two-thirds of retirees who had experienced age-related discrimination attributed their retirement to involuntary factors such as redundancy or dismissal. Such discriminatory workplace attitudes make expecting older Australians to work beyond retirement age particularly challenging.

As at the time of this publication, the government offers employers a Restart wage subsidy of up to $10,000 if they hire eligible job seekers who are 50 or above. However, hiring older workers will take more than money – it will require a deep-seated change in workplace attitude.

The latest ASX Corporate Governance Guidelines encourages listed companies to have a diversity policy focused on gender targets, although workplace diversity policies aimed at supporting older employees are still scarcely found as the general lack of a supportive attitude towards such policies remains an issue that is rarely tackled by corporate Australia. For the few companies that do have workplace diversity policies, the focus is often on bringing younger perspectives into the boardroom rather than retaining experience across various age groups in the workforce.

Incentives and penalties

Working beyond a traditional retirement age can provide many personal benefits beyond ongoing financial independence. For many people, work provides meaning and purpose – replacing that in retirement can be challenging. One study ranked retirement as the 10th most stressful life event.

However, many Australians will have no choice but to work for longer – even if they would prefer not to.

The government Age Pension eligibility age is set to rise from 65 to 67 years by 2023, although most Australians can access their super between the ages of 55 and 60 (depending on when they were born). Initial plans to raise the Age Pension eligibility age to 70 were scrapped in 2018.

However, the average super balance for men aged 55-64 is just $183,000 while for women in the same age range it is $118,600, according to industry lobbyist ASFA. Many Australians simply don’t have a big enough nest egg to live on, meaning they will have to look for work (and likely receive the lower amounts provided by the Newstart subsidy for job seekers rather than the Age Pension) or continue working longer.

Meanwhile, accessing the Age Pension was made harder in 2017 with a steeper taper rate (the rate at which the Age Pension is reduced when a retiree has assets above a certain threshold).

The Age Pension Work Bonus allows Age Pension recipients to keep more of their pension when they have income from working. Older Australians can also continue to make super contributions past the age of 65 although there are multiple rules to consider.

While retirement can be the reward for a lifetime of work, working beyond retirement also provides many benefits worth exploring.

Sources:

https://www.ncoa.gov.au/report/phase-one/part-b/7-1-age-pensionhttps://treasury.gov.au/publication/2015-igr
https://www.ricewarner.com/wp-content/uploads/2018/05/The-Age-Pension-in-the-21st-century-220518.pdf
https://theconversation.com/age-discrimination-in-the-workplace-happening-to-people-as-young-as-45-study-76095
https://www.employment.gov.au/employers-0#employing-mature-aged-workers
https://www.asx.com.au/documents/regulation/cgc-principles-and-recommendations-fourth-edn.pdf
https://thepsychologist.bps.org.uk/retirement-health-and-wellbeing
https://moneysmart.gov.au/how-super-works/getting-yoursuper
https://www.superannuation.asn.au/ArticleDocuments/269/SuperStats-Feb2020.pdf.aspx?Embed=Y
https://www.dss.gov.au/seniors/benefits-payments/age-pension

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