22 May 2012

Whites IFM has consistently argued that the outlook for Australian public finances is daunting.  The important starting point is demographics –  our population is aging so that over time, there will be a significantly greater proportion of retirees (non-tax payers) to that of workers (tax payers). There are three important ramifications of this development. Firstly the number of years that the average retiree is entitled to receive the aged pension has greatly increased – from  5 years  when life expectancy was 70, to 15 years with life expectancy around 80 years. Secondly, the advances in medical care are welcome but also very expensive. This magnifies the first factor – Australians are living longer thanks, in large part, to improved medical treatments. Thirdly the aged care sector has long been under-funded and this needs to be redressed to house and care for a substantial percentage of elderly Australians. All these pressures on government outlays will be occurring as the relative number of tax payers is falling.

The result of these factors is to place considerable upward pressure on future government expenditure. Two ways the government can (and will) respond is to increase the retirement age and to keep a lid on future pension increases. Australians approaching retirement would be optimistic to expect anything other than CPI increases to current pension levels. We expect pension eligibility to be generally tightened as the ballooning costs become apparent to successive governments. As Don Stammer points out in this article in The Australian: “Many Australians hope future governments will significantly increase the aged pension but that outcome is unlikely”.

At Whites IFM we strongly encourage saving and providing for you own retirement wherever possible. For more information on preferred retirement planning, please contact us via the “Enquires” section of this web page.