Age Pension age increasing to 67 years (not 70 years)

Note: This article explains the current Age Pension age. If you are seeking information on the retirement age for accessing superannuation benefits see SuperGuide article Accessing super: What is my preservation age?

If you are seeking information on the changes to the Age Pension asset test announced in the 2015 Federal Budget, and taking effect from January 2017, then see the SuperGuide article 300,000 retired Australians to lose some or all Age Pension entitlements. If you are seeking info on the January 2016 Age Pension changes affecting those with funded defined benefit super pensions, see SuperGuide article Super alert! Age Pension income test change hits funded defined benefit pensions.

Your Age Pension age, that is the age at which you are eligible to apply for the Age pension, depends on your date of birth.

If you were born before July 1952, your Age Pension age is 65 years. If you were born on or after 1 July 1952, then your Age Pension age will be 65.5 years, 66 years, 66.5 years or 67 years.

The first shift upwards in Age Pension age will occur in July 2017 when the Age Pension eligibility age increases to 65.5 years, and then in six-month increments every 2 years, until it reaches the age of 67 years from 1 July 2023. See Table 1 below to discover your Age Pension age.

What happened to the proposal to increase Age Pension age to 70 years?

The Liberal government wants to increase the Age Pension age to 70 years but has gone quiet on this plan due to electoral backlash, and receiving no support for this further increase from the ALP opposition or the minority parties. Unless the Liberals withdraw this Age Pension age policy from their election platform, my understanding is that the Liberals still plan to increase the Age Pension age to 70. Unless the Liberals announce otherwise, and the Liberals win the 2016 election, and secure a clear majority, they intend to increase the Age pension age to 70 years. Based on Liberal documents, the Age Pension age increase from 67 years to 70 years would happen in six-month increments (and over 2-year periods) starting from July 2017, until it reaches the age of 70 years from 1 July 2035. If the Liberals were to be successful in the 2016 election, then it can be expected that those born after December 1965 will have an Age Pension age of 70 years, subject to legislation.


Note: The key difference between the current laws and the proposed changes suggested by the Liberals is the maximum Age Pension age. Under the current laws the maximum Age Pension age is 67 years, while the Liberals want to increase the maximum Age Pension age to 70 years. Under the current laws (and under the changes proposed by the Liberals), the Age Pension age remains at 65 years for those born before July 1952, and progressively increases to 67 years by 2023. Under the current laws, the Age Pension remains at 67 years into the future while under the Liberals proposed changes would continue to increase the Age Pension age for those born after June 1958. In other words, the proposed Liberal changes (not law) affect those born on or after 1 July 1958. The Age Pension age would increase until it reached 70 years for those born on or after 1 January 1966. (For the background on this unsuccessful proposal by the Liberals, refer to the summary and Table 2, later in this article.)

Just for the record, in my view, suggesting raising the Age Pension age beyond age 67, while ignoring that mature age employees struggle to obtain work, and many Australians are not physically able to work full-time until age 70 or, in some cases, even until late-60s, is a simplistic solution to a more complex social issue. I provide a more detailed opinion on this issue at the end of this article.

For anyone born after June 1952, your Age Pension age will be older than 65 years under the current laws. See Table 1 below to work out your Age Pension age.

Table 1: What is your Age Pension age?

If you were born before July 1952 then your Age Pension age is 65 years (and younger for women born before 1949). If you were born after June 1952, then your Age Pension age depends on your specific date of birth.

Commencement dateAge Pension ageAffects people born
65Born before July 1952
From 1 July 201765.5From 1 July 1952 to 31 December 1953
From 1 July 201966From 1 January 1954 to 30 June 1955
From 1 July 202166.5From 1 July 1955 to 31 December 1956
From 1 July 202367On or after 1 January 1957

Source: Adapted from information on Centrelink section of DHS website.

Why is the Age Pension age increasing to 67 years?

The increase in the Age Pension age was debated several years ago by the former Liberal Howard Government but shelved due to its political sensitivity. When the former ALP government increased the Age Pension age, the arguments that it used to justify the increase in eligibility age for the Age Pension to 67 years were:

  • Age Pension age had 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 SuperGuide article Retirement: Can Australia afford to support your lifestyle?

How does your Age Pension age affect your retirement plans?

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 currently 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 currently eligible for a part Age Pension. From 1 January 2017, the Age Pension assets test is becoming stricter, which means a couple will be able to own just over $800,000 in assets (in addition to the family home) before losing the Age Pension entitlement (for more information on this change to the Age Pension assets test see SuperGuide article 300,000 retired Australians to lose some or all Age Pension entitlements).

Australians retiring today can access the Age Pension at age 65 (for men) and since July 2013, from age 65 for women. The Age Pension age for women used to be 60 years but has steadily increased to 65 years, in line with the Age Pension age for men.

Note: The Age Pension age will then remain at 65 for anyone born before July 1952, and will then steadily increase by six months every two years, until it reaches 67 in 2023. The first group of Australians affected by the Age Pension age increase will be those turning 65.5 years on or after 1 July 2017 (Age Pension age of 65.5 years).

Background: Proposed further increase to Age Pension age

If Liberals win the 2016 federal election and have a clear majority in both houses of parliament, then expect the Age Pension age to increase to 70 years, unless the Liberals withdraw the policy.

In May 2014, the former federal treasurer Joe Hockey announced that the Age Pension age will increase to age 70 by year 2035, and confirmed this fact in the 2014 Federal Budget. The Age Pension age is the age at which you can claim the Age Pension. The Liberals were not successful in getting this policy through with the composition of the current parliament.

What this would mean in practical terms is, if the Liberals did further increase the Age Pension age, that those born after 1965 can only claim the Age Pension from the age of 70. Anyone born before July 1952 would continue to have an Age Pension age of 65 (or if a woman, younger than 65 in some circumstances). Anyone born after June 1952 but before January 1966 would have an Age Pension age somewhere between age 65 and age 70. See table later in the article to find out your Age Pension age under the proposed laws supported by the Liberals (note that these changes have no chance of becoming law with the current parliament).

The proposed legislation (that is the Social Security and Other Legislation Amendment (2014 Budget Measures No 2) Bill 2014), was knocked back in the Senate by the Palmer United Party.


Note that the federal government’s proposed changes are more aggressive than the recommendation made by the National Commission of Audit (click on SuperGuide link for retirement-related recommendations of NCOA). The NCOA recommended that the Age Pension age increase to age 70 by 2053, while Hockey proposed that the Age Pension age increases to age 70 by 2035. (At the time of the NCOA report release, I mused if 2053 was a typo in the NCOA report).

For details of your Age Pension age under the Liberals proposals, see Table 2 below.

Another broken promise by the federal government: Note that prior to the September 2013 Federal Election, the Liberals publicly stated that they had no intention of pushing the Age Pension age to 70 years. It seems that pre-election promises count for nothing. The government then announced that the Age Pension age will increase to 70, and confirmed this fact in the 2014 Federal Budget. The Liberals however, were unsuccessful in getting these changes through parliament. The Government’s backtracking on election promises was also partly triggered by a Productivity Commission report, as well as Australia’s longevity demographics. In late November 2013, the Productivity Commission released a report about the ageing population of Australia and recommended that the Age Pension age increase to 70 years. A word of warning: this same report also recommended that retired home-owners should be forced to access the equity in their home to pay for health costs!

Table 2: What is your Age Pension age (under the Liberal government proposals)?

Commencement dateAge Pension ageAffects people born
65Born before July 1952
From 1 July 201765.5From 1 July 1952 to 31 December 1953
From 1 July 201966From 1 January 1954 to 30 June 1955
From 1 July 202166.5From 1 July 1955 to 31 December 1956
From 1 July 202367From 1 January 1957 to 30 June 1958
From 1 July 202567.5From 1 July 1958 to 31 December 1959
From 1 July 202768From 1 January 1960 to 30 June 1961
From 1 July 202968.5From 1 July 1961 to 31 December 1962
From 1 July 203169From 1 January 1963 to 30 June 1964
From 1 July 203369.5From 1 July 1964 to 30 December 1965
From 1 July 203570From 1 January 1966 onwards

Source: Table is the copyright of Trish Power and cannot be reproduced without express permission of SuperGuide and Trish Power. Table created from media transcripts, 2014 Federal Budget and some information published on Centrelink website (www.centrelink.gov.au).

Simplistic solutions distract from ageing population issues

Lifting the Age Pension age further, beyond age 67, causes unnecessary anxiety for our older workers, while ignoring that mature age employees struggle to obtain work, and many Australians are not physically able to work full-time until age 70. The recent suggestions contained in the Productivity Commission report, are simplistic solutions to a more complex social issue.


Further, increasing the Age Pension age won’t resolve the issue of rising health costs, which is a greater budgetary cost, and a greater problem than Age Pension costs. Making such announcements without offering supporting policies to transition older workers into a new world of working longer in meaningful employment is close to reckless by the federal government, and by the organisations making these suggestions. It also causes unnecessary anxiety for a generation (particularly for women) who have not had access to superannuation for much of their working lives. In the case of older women, many have not had access to an income (or if worked, were employed when women were paid only half of what mean earned). Many more women have had limited work experience for much of their lives, due to raising families.

In a related matter, an Australian think tank, the Grattan Institute, has come up with another simplistic suggestion that the government should raise the preservation age (age at which you can access your super), and the Age Pension age to 70 years, to balance the budget. The same think tank reckons your family home should not be exempt from the Age Pension assets test – not sure where they think Australia’s retirees are supposed to live. Why do economists (I confess to also holding such a qualification) so often treat the family home solely as an economic asset, notwithstanding there may be a minority of Age Pensioners who live in million-dollar homes while accessing the Age Pension.

Note that the National Commission of Audit has recommended increasing preservation age (age that you can access your super) to 62 years rather than 60 years, and eventually increasing it to 65 years, so it follows the increase in the Age Pension age, but 5 years’ earlier.

Talk about picking the low-hanging fruit. What about offering some insights into flexible workplaces for parents and older workers, and carers? Purely economic solutions are pointless without providing the infrastructure and social support necessary for fundamental economic and social change. Yes, we are living longer. If those longer lives are healthier, then, in most cases those healthier lives are due to life-saving heart and blood medication, joint replacements, transplants, and cancer treatments and other procedures. Perhaps we need to work out ways to tackle the rising costs of health care, and budget for them, while ensuring that we develop solutions that are acceptable for the Australian population – both young and old. I want our older generation to be able to afford quality healthcare, as well as to be able to live comfortably.

Under the current Age Pension age rules

In summary, your Age Pension age is:

  • 65 years if you were born before July 1952
  • 67 years if you were born after December 1956
  • Between 65 years and 67 years if you were born after June 1952 and before January 1957. For birth dates and Age Pension ages between these two key dates, see Table 1 near the start of this article for your Age Pension age.

Under the changes proposed by the Liberals

Under the Liberals proposals, your Age Pension age would be:

  • 65 years if you were born before July 1952
  • 70 years if you were born after 1965 (subject to legislation)
  • Between 65 years and 70 years if you were born after June 1952 and before January (subject to legislation). For birth dates and Age Pension ages between these two key dates (subject to legislation, and a federal election), see Table 2 near the end of this article for your Age Pension age under the Liberal government proposals.


Comments

  1. Ned Kelly 1812 says:

    The bottom line is that all the People who make these Decisions, work behind a desk and have no idea of hard physical work, Politicians futures are financially sound and the old and the young are portrayed as Parasites, when the real Parasites are the Ultra-Rich who do their best to contribute nothing but still live off the Fruits of our Labour.

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