In a surprise Budget announcement, the Federal Government has flagged that the Age Pension age is set to increase to 67 years of age from 2023.
Currently, Australians can access the Age Pension at age 65 (for men) and from 63.5 years (for women, although the Age Pension age was moving to 65 for women from 2014).
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.
Such an increase 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 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.
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.
Table source: Budget papers: Secure and Sustainable Pensions
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