Chairman Peter Harris will tell a breakfast in Perth on Thursday that Australia is ill-prepared for the coming flood of relatively healthy long-lived retirees.
“The original age pension recipients generally had spent near enough to 75 per cent of their life after the age of 15 in full-time work,” he will say.
“For the baby boomers, that figure has fallen to about 60 per cent, and for the generation today in high school, that figure will fall to around 50 per cent, mostly based on significant health gains.
“Over the next generation the cost of the age pension would climb by 1 per cent of gross domestic product, the cost of aged care by 1.8 per cent, and the cost of healthcare by 2.9 per cent.”
Older Australians were extremely reluctant to run down their savings or eat into the equity of their homes.
Contrary to widely-held belief, there was no evidence retirees deliberately blew their super on retirement and plenty of evidence that even in very old age they they remained net savers “as the wealth embedded in their housing asset persistently but invisibly increases, even as their personal health or aged care needs also grow.”
“At the personal level, there’s no reason to be critical of an inherent tendency to save in old age,” Mr Harris will say. “But poorly-constructed policies should not exacerbate such tendencies. Nor should they pander to populist commentary.”
Australians aged 65-74 had home equity per household of $480,000, Productivity Commission figures suggested. The median superannuation balance at age 60 was $95,000, yet housing was “the very last asset to be drawn upon, if at all”.
A Commission survey found 88 per cent of retirees planned to leave their house to their heirs. A separate Centrelink survey found retirees died with 90 per cent of the wealth they had when they first came to Centrelink’s attention.
One way of forcing retirees to use the value of their homes was to include them in the assets test for the pension. If they were completely included a further 11 per cent of retirees would lose the pension and almost half would have their pensions cut.
If instead only the value of assets above the median house price of $440,000 were included, the proportion of Australians qualifying for the pension would slip 2.5 per cent and 8 per cent of pensioners would lose some pension.
Mr Harris will call for a comprehensive review, arguing it is probably the only way to “generate the necessary public understanding that change may be needed”.