It is welcome news that the government might consider tightening the means test around the seniors’ health card. The card is currently restricted to those on incomes less than $50,000 — with the notable caveat that superannuation income doesn’t count. There is no assets test, so it’s a boon no matter whether your fortune is in savings or bricks and mortar. But the health card is just one tooth on the dentures as far as entitlements for the elderly are concerned. Everybody knows we are in an untenable position: the 65-plus age group is growing at 3.7 per cent a year, while our working age population grows at just 1.4 per cent. Our fertility rate of 1.93 children per woman is up slightly from historic lows, but still below the replacement rate without migration, as it has been since 1976. We will soon have to do a lot more with a whole lot less. As Peter Costello put it, demography is destiny.
There is resistance to reform, of course, from vested interests. The chief executive of National Seniors Australia recently warned ‘any political party that puts forward a sudden and rapid increase in the pension age will feel the sting at the ballot box’. A serious sting it would be — more in line with that which finished off Steve Irwin than the bumblebee variety. Pension reform involves messing with the best laid retirement schemes of a large cohort of women and men, and it is difficult and unpopular, particularly among those whose nest eggs you may be poaching. But with the age of entitlement apparently at an end, it is entirely necessary.
When Labor’s 2009 budget flagged a modest rise in the pension age, from 65 to 67, it constituted the first change to the male qualifying age since the pension was introduced nationally in 1909. A man born in that year could expect to live to just 55, and therefore never receive a government pension. A return to the heady days of the 1910s, where state-subsidised retirement was a rare gift for beating the biological odds, is not what I’m advocating. But given men and women born today can expect to live for 80-85 years, a qualifying age of 70 would provide for a generous decade of taxpayer-funded rumination on how thankful everyone should be for your lifetime of hard work.
Ultimately, though, the pension is a vital and pretty modest safety net. The real problem is in superannuation, where an egregious tax system rewards the rich. The effective tax concession on super contributions for people on very high incomes (up to $300,000) is 30 per cent. Compounding this injustice is tax-free superannuation withdrawal at the premature age of 60, which encourages baby boomers to funnel income into super, avoid tax and retire early. I’ve seen the glint in boomers’ eyes when they talk of this handiwork — though who could blame them, to paraphrase Kerry Packer, for doing everything possible to minimise their liabilities. As with so many things, boomers have a lot to answer for. Having rorted their way into owning everything through the scam that is negative gearing, they now seek to preserve that privilege by blocking any property development which might open up the market and dilute land values. You can be sure that having exploited every available loophole on their way up the ladder, the boomers will turn around in their retirement and agitate for the protection of their privilege.
Accordingly, National Seniors Australia has produced its annual list of demands ahead of the federal budget, including the stern directive: ‘National Seniors expects no negative changes to superannuation in the Abbott Government’s first term.’ To pay for this continued super largesse, it wants everyone else to stump up a further $6 to visit the doctor. Yes — NSA supports the infamous GP co-payment, which, it should be noted, would also apply to its members. As currently proposed (by Spectator regular Terry Barnes), it would be capped at 12 annual visits or $72, but that’s still an imposition on the struggling pensioners who this organisation is also supposed to represent.
Labor had a sensible and very minor plan to tax, at 15 per cent, income streams from super funds exceeding $100,000 a year. The tax would have only kicked in past $100,000 — not before. It would have given us back a tiny morsel of the millions being withdrawn to fund extravagant golfing trips, Winnebagos and Mediterranean cruises. But the Coalition won’t even deliver that, because apparently in this instance it’s ‘class warfare’, as opposed to reining in entitlement.
No political party can see straight on this issue. While Labor was prepared to tinker at the edges of superannuation, it is railing against the possible health card reforms. The Coalition seems like it might run with the commission of audit on some matters, but won’t budge on super. And everyone is scared of further lifting the retirement age. The bottom line? Nobody has a considered strategy for how to manage the ageing population.
If Joe Hockey is serious about ending the age of entitlement, he should look squarely at the greying end of the spectrum. Changing the tax concessions on super is a no-brainer. But to sustain our longer and healthier lives, we will have to look at further adjustments to the pension age. It’s time to go back to work, and stay there.