As the government prepares to increase the Age Pension to 70 by 2035, academics have expressed concerns about the attitudinal and financial barriers rife in the employment market.
Although a proportion of older workers may prefer to work until 70 and beyond – namely small business owners, and those with flexible work arrangements – those in trades and manual labour are disadvantaged.
In addition to this dilemma, there are variables such as business failure, redundancy, needing to change career, and not having enough superannuation to sustain them for the duration of retirement.
According to human resources expert Dr Keri Spooner from the University of Technology Sydney (UTS), the federal government has a lot of work to do in terms of funding research around to barriers to employment for older Australians. Such research would identify the skills older workers lack, the characteristics employers are looking for, and other barriers that keep older people out of the workforce.
“What is seriously lacking is a proper examination of all the factors at play,” Dr Spooner, senior academic in the UTS Management Discipline Group said.
UTS Professor Susan Thorp is an expert in retirement savings and long-horizon wealth management. She says superannuation is a key barrier to many seeking retirement. “Under existing rules, a person born in 1964 will have seven years between gaining access to their superannuation at the age of 60 and being eligible for the age pension at 67, says On average, people have only $200,000 in superannuation when they retire,” Professor Thorp said.
“Seven years is a long time in self-funded retirement – enough to use up $200,000 if you withdraw annual income roughly equal to the full pension,” she added.
For those facing a significant gap between accessing their super, and qualifying for the Age Pension, there is the possibility of qualifying for the disability pension, however eligibility criteria is tight and the payments are very low.
“It is not difficult to imagine a range of jobs that people simply can’t keep doing when they are in their 60s or 70s – electricians, plumbers, even farmers – and that could mean you might have to go on to the unemployment benefit, which is very low,” Professor Thorp said.
What’s more, Professor Thorp cautioned that many people overestimate the value of a retirement lump sum compared with a regular income and are unable to work out what a lump sum would mean in annual income.
“A superannuation lump sum is likely the biggest amount of money most people have ever seen in one hit. They have to decide what to do with it in that first year of retirement and what to do for the next 25 years. The uncertainty multiplies because we don’t know how long we are going to live, we don’t know what the government will do to pensions and superannuation rules and we don’t know what the investment markets will do,” she said.