Changing Australia’s Age Pension Qualification Age: Modelling Differential Effects by Race

Abstract

Increasing the age at which people are eligible for the age pension is one mechanism by which governments of developed nations are attempting to manage increasing costs associated with population ageing. In Australia, there are a number of groups within the population who may be affected in unintended ways by increasing the eligibility age to 70 years by the year 2035, as was proposed in the 2014 Federal Budget. Most notably, Aboriginal and Torres Strait Islander (Indigenous) Australians currently with an average at birth life expectancy of 69.1 years for males and 73.7 years for females, nearly 11 years less than non-Indigenous Australians, may be the most affected. This study explores the consequences of the proposed future amendments to the age pension eligibility age, using projections of the likely age structures of future populations to estimate expected years of life remaining after reaching pension age. Despite projected improvements for Indigenous life expectancies, increasing the pension eligibility age under the schedule proposed in the policy would significantly reduce the expected years in post pension age, thus countering some of the anticipated benefits flowing from expected future life expectancy increases. However, if the eligibility age were to be increased more gradually, Indigenous Australians would be afforded a greater opportunity to access age pension benefits, whilst still reducing the length of time the non-Indigenous population is eligible to access the age pension, thus fulfilling policy objectives to manage increasing costs associated with population ageing.