Take note: Age Pension age increasing to 67 years

Note: This article below explains the eligibility age for the Age Pension. For information on the retirement age for accessing superannuation benefits see SuperGuide article Preservation age: I’m 58. Can I withdraw my super benefits?

Four years ago, in the May 2009 Federal Budget, the Government announced that the Age Pension age is set to increase to 67 years of age from 2023. This major change may have disappeared from the front pages of newspapers but it should be ‘top of mind’ for most Australians thinking about retirement.

For the majority of Australians, the Age Pension will remain an important component of any retirement plan, even when an individual has substantial superannuation and non-superannuation savings.

Around 80% of Australians who have reached Age Pension age receive a full or part Age Pension. Some couples who hold more than a $1 million in assets (in addition to the family home) are eligible for a part Age Pension.

Currently, Australians can access the Age Pension at age 65 (for men) and from 64.5 years (for women, although the Age Pension age is moving to 65 for women from 2014). The Age Pension age will then remain at 65 for anyone born before July 1952.

The lift in Age Pension age applies to all Australians born after June 1952. Your retirement planning will be affected if you were born after June 1952, and you’re expecting to receive a part or full Age Pension on retirement.

Gradual increase in Age Pension age from 2017

The first shift upwards in Age Pension age will occur in 2017 when the eligibility age increases to 65.5 years, and then in six-month increments every two years, until it reaches the age of 67 in 2023 (see table below).

Note: The Service Pension qualifying age is to remain at the current level of 60 for men. For women it is progressively increasing to 60 by 1 January 2014.

Background: The increase to the Age Pension age was debated several years ago by the former Liberal Government but shelved due to its political sensitivity. The arguments that the current Labor Government are using to justify the increase in eligibility age are:

• Age Pension age has not increased above 65 years since its inception in 1909.
• When the Age Pension was introduced, a male retiring at age 65 spent, on average, 11 years in retirement. At that time, around half of the male population reached retirement age.
• Today over 85 per cent of the male population reaches retirement age and then can expect to spend, on average, more than 19 years in retirement.
• This change is consistent with international trends: The United States, Germany, Iceland, Norway and Denmark currently have, or are moving towards, retirement ages of 67. The United Kingdom is increasing the Age Pension age to 68.

I explain the context for this fundamental shift in retirement incomes policy in more detail in the article Retirement: Can Australia afford to support your lifestyle?

Source: Table created from information published on Centrelink website (www.centrelink.gov.au)