Recessions scar young people their entire lives, even into retirement



Shutterstock

Jenny Chesters, University of Melbourne

It is well-established that recessions hit young people the hardest.

We saw it in our early 1980s recession, our early 1990s recession, and in the one we are now entering.

The latest payroll data shows that for most age groups, employment fell 5% to 6% between mid-March and May. For workers in their 20s, it fell 10.7%

The most dramatic divergence in the fortunes of young and older Australians came in the mid 1970s recession when the unemployment rate for those aged 15-19 shot up from 4% to 10% in the space of one year. A year later it was 12%, and 15% a year after that.


Unemployment rates 1971-1977


ABS 6203.0

At the time, 15 to 19 years of age was when young people got jobs. Only one third completed Year 12.

What is less well known is how long the effects lasted. They seem to be present more than 40 years later.

The Australians who were 15 to 19 years old at the time of the mid-1970s recession were born in the early 1960s.

In almost every recent subjective well-being survey they have performed worse that those born before or after that period.




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There’s a reason you’re feeling no better off than 10 years ago. Here’s what HILDA says about well-being


Subjective well-being is determined by asking respondents how satisified they are with their lives on a scale of 0 to 10, where 0 is totally dissatisfied and 10 is totally satisfied.

Australia’s Household, Income and Labour Dynamics survey (HILDA) has been asking the question since 2001.

In order to fairly compare the life satisfaction of different generations it is necessary to adjust the findings to compensate for other things known to affect satisfaction including income, gender, marital status, education and employment status.

Doing that and selecting the 2001, 2006, 2011 and 2016 surveys to examine how children born at the start of the 1960s have fared relative to those born earlier and later, shows that regardless of their age at the time of the survey, they are less satisfied than those born at other times.


Subjective wellbeing by birth cohort over four HILDA surveys

Subjective well-being on a scale of 0 to 10 where 0 is totally dissatisfied and 10 is totally satisfied.
Regressions available upon request

The consistency of lower levels of subjective well-being reported by the 1961-1965 birth cohort suggests something has had a lasting effect.

An obvious candidate is the dramatic increase in the rate of youth unemployment in at the time many of this age group were trying to get a job.

Over time, labour markets can recover but the scars of entering the labour market during a time of sudden high unemployment can be permanent.




Read more:
The next employment challenge from coronavirus: how to help the young


The impacts of the early 1980s and early 1990s recessions on young people were alleviated somewhat by the doubling of the Year 12 retention rate and later by the doubling of university enrolments.

But the education sector is maxed out and might not be able to perform the same trick for the third recession in a row.

Reinvigorating apprenticeships and providing cadetships for non-trade occupations might help. Otherwise the effects of the 2020 recession on an unlucky group of Australians might stay with us for a very long time.The Conversation

Jenny Chesters, Senior Lecturer/ Research Fellow, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Retire the retirement village – the wall and what’s behind it is so 2020



Jemima Rosevear, Author provided

Rosemary Jean Kennedy, Queensland University of Technology and Laurie Buys, The University of Queensland

Retirement villages – walled, gated and separate seniors’ enclaves – have had their day. The word “retirement” is redundant and engagement between people of all ages is high. That’s how participants in the Longevity By Design Challenge envisage life in Australia in 2050.

Their challenge was to identify ways to prepare and adapt Australian cities to capitalise on older Australians living longer, healthier and more productive lives. Their vision, outlined in this article, offers a positive contrast to much of the commentary on “ageing Australia”.




Read more:
We’re not just living for longer – we’re staying healthier for longer, too


We have been repeatedly warned about a looming “crisis” when by 2050 one in four Australians will be 65 or older. They have been portrayed as dependent non-contributors, unable to take care of themselves. This scenario of doom is based on underlying assumptions that everyone over 65 wants to, can or should stop any kind of productive contribution to Australia.

What if these assumptions are wrong?

The longevity bonus

Australians’ average life expectancy is well into our 80s. That represents a 30-year longevity “bonus” since the Age Pension was introduced in 1909 when average life expectancy was 55.

Increases in the average life expectancy of Australian men and women since 1890.
Australian Bureau of Statistics, CC BY



Read more:
Retiring at 70 was an idea well ahead of its time


Now, older people are healthier, working for longer – whether paid, volunteering, flexible, part-time, full-time or launching start-ups – or are in learning programs. By 2030 all of the baby boomers will have turned 65. At this time Generation X will start their contribution to the expanding older cohort.

Australian society will be better positioned to navigate this future if we make the most of the significant opportunities baby boomers present. They are living much longer, want to remain productive and engaged throughout their adult lives, and have a valuable cache of knowledge and skills.

One way to support economic and social participation is to reconsider the factors – physical, regulatory and financial – that determine how our buildings, suburbs and streets are organised.

Conventional urban development models rely on short-term development finance. It delivers suburban cities of individual houses with a need for private transportation. For many households (not just seniors) distance and lack of mobility are barriers to participation, resulting in isolation and loneliness.




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1 million rides and counting: on-demand services bring public transport to the suburbs


Making the most of life after 65

The Longevity by Design Challenge brought new perspectives to preparing and adapting Australian cities to capitalise on the “longevity” phenomenon over coming decades. The challenge asked:

How do we best leverage the extra 30 years of life and unleash the social and economic potential of people 65+ to contribute to Australia’s prosperity?

In February 2020, 121 professionals (of all ages) from 60 built environment design and senior living organisations, along with several older people, took part in the challenge. They explored how baby boomers will change the landscape of living, learning, working and playing. Sixteen cross-disciplinary creative teams considered what longevity could look like in this new environment in which buildings and neighbourhoods are remade.

Multi-generational, cross-disciplinary teams at work on the Longevity by Design Challenge.
The University of Queensland, Author provided

Good design begins with people. Together the participants concluded that designing for older people is actually “inclusive design”. Everyone wants the same things for a good life: autonomy and choice, purpose, family and friends, good health and financial security.




Read more:
From 8 to 80: designing adaptive spaces for an ageing population


Teams were presented with one of three locations representing typical middle and outer suburbs. They were challenged to transform buildings and neighbourhoods to make the most of longevity opportunities.

The teams used principles of social and physical connectedness with the aim of increasing choices and improving circumstances for people at all stages of life. Key design priorities were “mix” – of places, uses, people and generations – and “heart”, which placed people at the centre of the narrative.

Suggested approaches included:

  • building walkable neighbourhoods that reduce distances between homes and services

  • converting typical house blocks to “super blocks” where multiple generations can live

Superblocks created by converting three houses into five multi-generational residences.
Architectus with Feros Care, Aspire 4 Life, S Wyeth and M Denver, Author provided
  • adopting finance development models using long-term capital, rather than short-term debt, for greater financial and community returns.
The Longevity Urban CommunitY concept (LUCY) of the sort that might evolve using long-term equity. Clusters of multi-residential buildings with a mix of commercial and community uses at ground level form a network of pedestrian streets, parks and plazas. Housing design blends individual needs for privacy, and collective needs for community.
Deicke Richards, Vee Design, Pradella Property Ventures, N Whichelow, Condev Construction and Bolton Clarke. Images: Peter Richards, Deicke Richards, Author provided

Neighbourhoods could be retrofitted over 30 years. This would require changes to local government planning codes and innovations by the finance sector.

Other teams designed interconnected environments using links between natural, built and technological assets. They designed spaces to enable people over 65 to continue to make creative and productive contributions.

By creating inclusive infrastructure, such as closely connected living and learning “micro-neighbourhoods”, people of all ages remain the “heart” of the economic, social and cultural life of communities. A mobility “ecosystem”, including automated buses and electric ride sharing, could connect specialist knowledge and skill centres to local hubs.

Tek Trak embraces autonomous and electric vehicle technology to radically alter the way.
we get around.

Elevation Architecture, Urban Strategies and Milanovic Neale, Author provided

Making inclusive neighbourhoods happen

While autonomous vehicle technology might provide more equal access to mobility and transportation, the designers warned that transforming conventional settings of houses and cars to walkable neighbourhoods and autonomous vehicles will be gradual. It depends on two things:

  1. urban planning that ensures everyone has good access to safer transport alternatives rather than traffic-centric layouts

  2. long-term equity financed by “future-focused” lenders.

In this model, lenders are less focused on short-term returns. Instead, they have a greater focus on quality design as a catalyst for more development. In a virtuous circle, attractive development that places people close to community activities and businesses generates greater “footfall”. That in turn creates more business opportunities that make financially viable communities.

The Longevity by Design Challenge identified a range of opportunities to create a vibrant “longevity” economy by including people of all ages. Small, incremental and affordable changes towards resilient and age-friendly communities can transform perceived burdens into real assets.

Planning communities to embrace, not exclude, people over 65 has all kinds of benefits for Australia.The Conversation

Rosemary Jean Kennedy, Adjunct Associate Professor of Architecture and Urban Design, Queensland University of Technology and Laurie Buys, Professor, Director of Healthy Ageing Initiative, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

5 questions about superannuation the government’s new inquiry will need to ask



Superannuation has a smaller role in the retirement incomes system than is often suggested.
Shutterstock

Peter Martin, Crawford School of Public Policy, Australian National University

The government’s new retirement incomes review will need to work quickly.

On Friday Treasurer Josh Frydenberg said he expected a final report by June, just seven months after the issues paper he wants it to deliver by November.

The deadline is tight for a reason. In recommending the inquiry in its report on the (in)effeciency of Australia’s superannuation system this year, the Productivity Commission said it should be completed “in advance of any increase in the superannuation guarantee rate”.

In other words, in advance of the next leglislated increase in compulsory superannuation contributions, which is on July 1, 2021.




Read more:
Government retirement incomes inquiry puts superannuation in the frame


The next increase (actually, the next five increases) will hurt.

The last two, on July 1 2013 and July 1 2014, took place when wage growth was stronger. In 2013 wages growth was 3% per year.


Source: Australian Tax Office

And they were small – an extra 0.25 per cent of salary each.

The next five, to be imposed annually from July 1 2021, are twice the size: 0.5% of salary each.

If taken out of wage growth, they’ve the potential to cut it from its present usually low 2.3% per annum to something with a “1” in front of it, pushing it below the rate of inflation, for five consecutive years.

If we were going to do that (even if we thought the economy and wage growth could afford it) it would be a good idea to have a good reason why. After all, compulsory superannuation is the compulsory locking away of income that could otherwise be spent or used to pay down debt or saved through another vehicle, regardless of the wishes of the person whose income it is.

Question 1. What’s it for?

Fortunately, the new inquiry doesn’t need to do much work on this one.

For most of its life compulsory super hasn’t had an agreed purpose. At times it has been justified as a means of restraining wage growth, at times as means of restraining government spending on the pension, at times as means of boosting national savings.

In 2014, more than 20 years after compulsory super began, the Murray Financial System Review asked the government to set a clear objective for it, and two years later the government came up with one, enshrined in a bill entitled the Superannuation (Objective) Bill 2016.

The bill lapsed, but the objective at its centre lives on as the best description we’ve come up with yet of what compulsory super is for:

to provide income in retirement to substitute or supplement the age pension

Which raises the question of how much we need. For compulsory super, the answer is probably none. People who want more than the pension and their other savings can save more through voluntary super. People who don’t want more (or can’t afford to save more) shouldn’t.

Question 2. How much do people need?

Assuming for the moment that how much people need in retirement is relevant for determining how much compulsory super they need, the inquiry will need to examine what people need to live on in retirement.

The “standards” prepared by the Association of Superannuation Funds of Australia are loose. The more generous of the two allows for overseas travel every two or so years, A$163 per couple per fortnight on dining out, $81 on alcohol “or equivalent spent
with charity or church”.




Read more:
Why we should worry less about retirement – and leave super at 9.5%


It isn’t a reasonable guide to how much people need to live on, and certainly isn’t a reasonable guide for how much the government should intervene to make sure they have to live on. They are standards it doesn’t intervene to support while people are working.

And there’s something else. Super isn’t what will fund it. Most retirement living is funded outside of super, either through the age pension, private savings, or the family home (which saves on rent). Most 65 year olds have more saved outside of super than in it, and a lot more than that saved in the family home.

It’s a slight of hand to say that retirees need a certain proportion of their final wage to live on and then to say that that’s how much super should provide.

Question 3: Does it come out of wages?

The best guess is that, although paid by employers in addition to wages, compulsory super comes out of what would otherwise have been their wage bill.

Treasury puts it this way:

Though compulsory superannuation guarantee contributions are paid by employers, wage setting generally takes into account all labour costs. As such, it is widely accepted that employees bear the cost of higher superannuation guarantees in the form of lower take home pay.

The inquiry will probably make its own determination. If it finds that extra contributions do indeed come out of what would have been pay rises, it will have to consider the tradeoff between lower pay rises (and they are already very low) and the compulsory provision of more superannuation in retirement.

Question 4: Does it boost private saving?

It’d be tempting to think that the compulsory nature of compulsory superannuation meant that each extra dollar funnelled into it increased retirement savings by an extra dollar. But it doesn’t, in part because wealthy Australians who are already saving a lot have the option of offsetting it by saving less in other ways.

For them, the increase in saving isn’t compulsory.

For financially stretched Australians unable to afford to save (or for Australians at times in times life when they can’t afford to save) the compulsion is real, and unwelcome.

The inquiry will have to make its own assessment, updating Reserve Bank research which found in 2007 that each extra dollar in compulsory accounts added between 70 and 90 cents to household wealth.

Question 5: Does it boost national saving?

Boosting private saving (at the expense of people who are unable to escape) is one thing. Boosting national savings (private and government) is another. The tax concessions the government hands out to support superannuation are expensive. The concession on contributions alone is set to cost $19 billion this year and $23 billion in 2022-23, notwithstanding some tightening up. It predominately benefits high earners, the kind of people who don’t need assistance to save.




Read more:
Myth busted. Boosting super would cost the budget more than it saved on age pensions


On balance it is likely that the system does little for national savings, cutting government savings by as much as it boosts private savings. But because the question hasn’t been asked, not since the Fitzgerald report on national saving in 1993 shortly after compulsory super was introduced, we don’t know.

It’ll be up to the inquiry to bring us up to date.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Tim Wilson’s ‘retirement tax’ website doesn’t have a privacy policy. So how is he using the data?


Andre Oboler, La Trobe University

A growing debate over Labor’s policy to end cash rebates for excess franking credits has led to calls for the chair of parliament’s economics committee, Liberal MP Tim Wilson, to resign.

Labor has accused Wilson of using a parliamentary inquiry into the policy to spearhead a partisan campaign against it.

Part of the controversy revolves around a website Wilson is promoting – stoptheretirementtax.com – that initially required people who wanted to register to attend public hearings for the inquiry to agree to put their name to a petition against the policy. Wilson described this as a “mistake” that has since been fixed.

But there’s another issue with the website that’s worth taking a look at: if it complies with privacy law.

Political parties are exempt from the usual privacy rules, so we need to know if stoptheretirementtax.com is a Liberal party website or government website. The answer has implications for whether privacy law may have been breached, and if the data collected can be used for political campaigning in the upcoming federal election.




Read more:
Australia should strengthen its privacy laws and remove exemptions for politicians


A party or parliamentary website?

Stoptheretirementtax.com was registered anonymously on October 31. While it’s a requirement of website registration for owners to be publicly listed, in this case a domain privacy service was used to hide those details.

By mid-November the site was being shared by a financial services company with their clients, who said that Wilson had sent the website details to them. In several tweets promoting the inquiry in November, Wilson didn’t mention the site.

The site was promoted publicly in January, when Wilson tweeted six times that people should use it to register for hearings in Queensland and New South Wales.

In these tweets, Wilson identified himself as both the Liberal MP for Goldstein and the Chair of the Economics Committee.

By contrast, stoptheretirementtax.com doesn’t mention Wilson’s electorate or political party. The bottom of the site has the Australian coat of arms with the words “Chair of the House Economics Committee”. Wilson’s parliamentary contact details appear alongside a statement that reads:

Authorised by Tim Wilson MP, Chair of the Standing Committee on Economics.

The confusion around whether stoptheretirementtax.com is an official government website begins with the website’s domain name. It’s based on a slogan coined by Wilson Asset Management, a financial services company that is actively campaigning against Labor’s policy on franking credits. The site also uses a photograph the company has used in their campaign, and Wilson has said Wilson Asset Management were consulted in the site’s development.

Then there is the text, which reads:

At the next election your financial security will be on the ballot … Labor are attacking your full tax refund. After the election they want to scrap refundable franking credits. That will hit your security in retirement and risk pushing many vulnerable retirees below the poverty line.




Read more:
The Australian public cares about privacy: do politicians?


What data is being collected?

Stoptheretirementtax.com is collecting personal information. Visitors who wish to send a submission to the inquiry or register to attend public hearings are required to provide their name, email address, mailing address and phone number.

Visitors who want to send a submission to the standing committee on economics are offered a box with pre-filled text. A small note reads: “feel free to edit, or write your own”. A second box invites visitors to share their story.

Design features such as the colouring of the text could be seen to discourage editing of the first box while directing people to the second, meaning many people who submit a response will likely end up including the pre-filled text in their submission.

When registering for the public hearings, users are offered two check boxes (pre-checked), which state:

I want to be registered for the petition against the retirement tax

I want to be contacted on future activities to stop the retirement tax.

Until Sunday, it was impossible to register for a hearing without also signing the petition. Tim Wilson has said this was an “error”. The required check box for hearings and the design of the submission boxes may in fact be a dark pattern – a use of design feature to manipulate users into making the decision the site owner wants.

The site contains no privacy policy or indication of who the data is shared with or how it will be used.

On Monday, a page for the inquiry was added to the Australian Parliament’s website describing itself as the “the official page of the committee”. It states that submissions to the inquiry can be made via the Parliament’s submission system or by email. It also explains that “pre-registration is not required to participate” in the hearings.

A matter of privacy

Australian privacy is largely regulated by the Privacy Act and the Australian Privacy Principles it contains. Registered political parties are exempt, but stoptheretirementtax.com does not appear to come from a registered political party.

To assert it is campaign material from a registered political party at this stage would raise electoral law issues. The Commonwealth Electoral Act requires that registered political parties identify themselves in the authorisation statement on their political materials. Stoptheretirementtax.com has no such authorisation.

The Privacy Act does apply to government agencies, including ministers, departments and people:

holding or performing the duties of an appointment… made… by a Minister.

The Chair of a Standing Committee is “appointed by the prime minister”, making them an agency subject to the Australian Privacy Principles.

The Australian Privacy Principles requirements for government agencies include:

  • being open and transparent about how personal information is managed, including having a privacy policy
  • explaining why they are collecting, holding, using or disclosing personal information
  • only collecting personal information if it is reasonably necessary or directly related to one of their function or activities
  • only collect personal information by lawful and fair means
  • disclosing who else the personal information would usually be shared with

A failure to comply with the Australian Privacy Principles may put personal information at risk and can attract the attention of the Information Commissioner, who regulates privacy.

What about parliamentary privilege?

The Australian Law Reform Commission noted in 2008 that:

Ministers engaging in their official capacity are bound by the Privacy Act, while MPs engaging in political acts and practices are not.

A Committee Chair would likely be similarly bound only while acting in that capacity.

Some of the time, while acting in their capacity, they may be effectively exempt from the Privacy Act due to parliamentary privilege.

Section 16(2) of the Parliamentary Privileges Act reasserts a right of immunity going back to the Bill of Rights of 1688. It covers:

all words spoken and acts done in the course of, or for purposes of or incidental to, the transacting of the business of a House or of a committee.

That doesn’t mean the principles don’t apply, just that enforcing corrective action may be beyond the reach of the courts. Parliament has its own processes that could still be used to address concerns.

The usual rules, enforceable by the courts, may still apply in circumstances where a committee chair is acting in that capacity, but outside the business of the committee.

Advocacy activities, like running a petition or soliciting contact details for political action may not be something “for the purpose” or “incidental” to the business of a committee. In fact, publishing an overtly political website may itself step outside the protection – as it is the committee and its parliamentary work, not the activities of the chair per se, that attract the privilege.




Read more:
Australians’ trust in politicians and democracy hits an all-time low: new research


Reaching a resolution

The best resolution would be for Tim Wilson to take down the site (particularly in light of the new official site), pass to the Committee Secretariat any information they require (such as submissions), then delete all personal information he has collected through the stoptheretirementtax.com website.

A full disclosure of who data may have been shared with, where it was held and how it was secured would also help. If data has been disclosed to anyone other than the Parliamentary Committee, those who have been impacted should be informed. The Information Commissioner should be consulted for guidance and assistance.

The broader lesson is that privacy must be taken seriously. The Australian Privacy Principles are designed to ensure transparency and accountability. The lack of a privacy policy on the website should have served as a warning.The Conversation

Andre Oboler, Senior Lecturer, Master of Cyber-Security Program (Law), La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Why we should worry less about retirement – and leave super at 9.5%


File 20181106 74754 18c9lhn.jpg?ixlib=rb 1.1
Most retirees are financially secure. Many earn more than they did while working, the Grattan Institute finds.
Shutterstock

Brendan Coates, Grattan Institute; John Daley, Grattan Institute, and Jonathan Nolan, Grattan Institute

It’s conventional wisdom that Australians don’t save enough for retirement. Most workers themselves think they won’t have enough to retire on, and their concerns are rising.

But the conventional wisdom is wrong.

Our new report, Money In Retirement: More Than Enough shows that most people who are actually retired feel more comfortable financially than the Australians younger than them who are still working.

Retirees of today tend to slow their spending as they age, tend to keep saving in retirement, and often leave an legacy almost as big as the nest egg they had on the day they retired.




Read more:
The myth of the ageing ‘crisis’


When surveyed today the retirees of the future might be worried about their retirement, but economic growth means they will almost certainly be on even higher incomes than retirees today.

These findings might seem surprising: they contradict the repeated messaging from the financial services industry that Australians won’t have enough for retirement.

But that industry’s claims are based on research that overlooks two important points.

Retirees spend less over time

Much of the research assumes that retirees need to save enough to enable their incomes to keep climbing throughout their retirement in line with general wage growth.

Implicitly, it assumes that a retiree needs to spend 25% more at age 90 than at age 70, after accounting for inflation.

But our analysis shows that retired Australians tend to spend less over time, even those who have money to spare.



Young retirees might chalk up frequent flyer points, but they do it less as they get older.

Spending tends to slow at around the age of 70, and falls rapidly after age 80, to just 84% of what was spent at retirement age.

Even the wealthiest retirees spend less as they age. At the other end of the scale, pensioners receive discounts on everything from car registration to rates.

Our research finds that retirees spend less over time on food, alcohol, tobacco, clothes, furnishings, transport and recreation.



They spend more on health care as they age, but Medicare largely shields them from the full costs. The modestly higher out-of-pocket costs they do pay are mainly due to rising premiums for private health insurance.

Not only do most retirees not draw down their savings throughout retirement, many add to them.

Even among pensioners, one recent study found that the median (typical) pensioner still had 90% of what he or she retired on after eight years.




Read more:
Poor and rich retirees spend about the same


This means that calculations about the adequacy of retirement savings ought to be based on whether they are enough to maintain buying power (at best) rather increase it in line with wage growth.

Many prominent studies also ignore non-super savings, which are material, especially for wealthier households.

They lead to misguided calls for ever-higher super contributions in order to ensure reach the point where super alone is enough to provide an adequate retirement income, even though many households will have income from other sources.

Most will have enough super

Our modelling shows that people starting work today will have adequate retirement incomes: workers of all income levels will retire on incomes at least 70% of their pre-retirement earnings – the so-called replacement benchmark used by the Organisation for Economic Cooperation and Development and the Mercer Global Pension Index.



In fact the median (typical) worker can expect a retirement income of 91% of his or her pre-retirement income.

This means that many low-income Australians will actually get a pay rise on retirement.

Even workers in their 40s and 50s today – many of whom didn’t benefit from the present high rate of compulsory super contributions for their entire working lives – can expect a retirement income of about 70% of their pre-retirement incomes.

So compulsory super can stay at 9.5%

It means that that there is no obvious case to lift compulsory super contributions from 9.5% to 12% of salary as presently legislated.

Doing so might further boost retirement incomes (especially among those low and middle earners unable to compensate for the higher contributions by winding back other savings), but at the expense of providing lower incomes while working.

As the Henry Tax Review noted, higher compulsory super contributions are ultimately funded by lower wages than would have been the case, meaning lower living standards while in work.

As it happens, higher contributions would do little to change the retirement incomes of low and middle income Australians. Their extra superannuation income they provided would cut their age pension payments.




Read more:
The superannuation myth: why it’s a mistake to increase contributions to 12% of earnings


Higher compulsory contributions would also damage pensions in another way.

The age pension is indexed to wage growth which would be lower if employers diverted a steadily increasing proportion of their employee budget to super.

It means the most fervent opponents of a lift in compulsory super contributions from 9.5% to 12% ought be those people presently on the age pension.

The government ought to oppose it as well. Diverting more of what would have been wages to more lightly taxed super will strain its budget. Scrapping the proposed increase would save it an impressive A$2 billion a year.

We can find better ways to help retirees

Even if governments did feel it necessary to boost retirement incomes, lifting compulsory super contributions would be one of the worst ways to do it.

Loosening the age pension assets test taper could boost retirement incomes of around 20% of retirees, climbing to more than 70% over time. It would cost the Budget just A$750 million a year – less than half the cost to it of the proposed increase in compulsory super.

The real priority – by far the biggest bang for the buck in alleviating poverty in retirement – should be boosting Commonwealth rent assistance by 40%, providing an extra $1,410 a year for retired singles and $1,330 for retired couples.




Read more:
Renters Beware: how the pension and super could leave you behind


Senior Australians who rent privately are much more likely to suffer financial stress than homeowners. And renting will become more widespread as younger generations on low incomes find themselves less able to afford homes.

Australians have been told for decades that they’re not saving enough for retirement. Such claims are inconsistent with the facts. Most of today’s workers can already expect a comfortable retirement. Forcing them and future workers to save more money for retirement that they’ll never spend is simply a recipe for larger bequests.The Conversation

Brendan Coates, Fellow, Grattan Institute; John Daley, Chief Executive Officer, Grattan Institute, and Jonathan Nolan, Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Renters Beware: how the pension and super could leave you behind



File 20181102 83632 ws4yw1.jpg?ixlib=rb 1.1
Super and the pension treat most retirees well, but not renters.
Shutterstock

Rafal Chomik, UNSW

How we fund retirement in an ageing century ought to worry all of us.

But one group of us should be much more worried than the rest.

In a new set of research briefs published by the Centre of Excellence of Population Ageing Research, we report that most people do well out of our retirement income system and that the living standard of retirees has improved over the past decade.

In international comparisons, our system ranks highly, for good reason.

Most retirees do well

About 60% of older Australians can afford a lifestyle better than that deemed to be “modest” by widely used standards.

Households headed by baby boomers reaching retirement age between 2006 and 2016 did so with incomes 45% higher than those who retired a decade earlier.

Typical boomer households aged in their late 60s earn almost as much as they did when they were still working – only 20% less, that is, with about 80% of their working income maintained.

And their needs are lower. Lower spending in retirement is common because older households need to pay less for transport, less for working clothes, and have more time to cook.

Many continue to save while in retirement.




Read more:
Please, not another super scheme, Mr Keating. It’s what the pension is for


And they tend to spend less over time, rather than more over time as benchmarks publicised by the superannuation industry assume.

When we included the value of living rent-free for the 80% or more of retirees who own their own home (about A$10,000 per year on average), we found older Australians live in no more poverty than working age Australians.

But not renters

The living standards of those who rent in retirement are very different. Only about 15% of older renters can afford a lifestyle better than “modest”.

Single renters are particularly badly off.

Among all older people only about 10% fall below the poverty line set at half the median income.

Among older Australians who rent, 40% fall below.

Among older Australians who rent alone, it’s more than 60%.


https://datawrapper.dwcdn.net/Oyddt/1/


If that relative poverty measure seems too abstract, an absolute dollar figure might help.

Alarming research aired on the ABC in September found that, on average, aged care homes were spending $6.08 per day on food per resident.



Our research finds that among pensioners who rent alone, one quarter spend even less than that per day.

And it’s getting worse

The pension has always favoured home owners.

On the one hand it is insufficient for renters and on the other it doesn’t cut pension payments to the owners of very valuable homes, because the value of any home – no matter how big – is excluded from the pension means test.




Read more:
Let’s talk about the family home … and its exemption from the pension means test


Rental assistance, introduced to complement the pension in the 1980s, was meant to alleviate this, and to some extent it does.

But it climbs only in line with the consumer price index every six months, which usually fails to keep pace with rents.




Read more:
Life as an older renter, and what it tells us about the urgent need for tenancy reform


Sydney rents have doubled over the past two decades. The consumer price index has climbed 68%.

As a result, rental assistance is less effective in reducing financial stress than it was when it was introduced, and is set to become even less effective if rents continue to climb more quickly than the price index.

And more of us look set to rent

Households headed by Australians aged 35 to 44 are now 10 percentage points less likely to own their own home than were households headed by people of the same age a generation earlier.

They might be merely postponing buying homes until they are older as more of what would have been their income is sequestered into super and they enter the workforce and retire later.




Read more:
Explainer: what’s really keeping young and first home buyers out of the housing market


If so, they might end up owning and paying off homes by retirement at the same rate as boomer households did before them.

If not, more and more of them could end up in poverty in retirement.The Conversation

Rafal Chomik, Senior Research Fellow, ARC Centre of Excellence in Population Ageing Research (CEPAR), UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Vertical retirement villages are on the rise, and they’re high-tech too



File 20180614 32304 wub31n.jpg?ixlib=rb 1.1
High-rise retirement homes in the city are the future for baby boomers.
from www.shutterstock.com

David Tuffley, Griffith University

It is no secret people are living longer, thanks to advances in medical technology. Futurist Ray Kurzweil predicts we are approaching a point of breaking even – where for every year lived, science can extend lifespans by at least that much. And more than 80% of Kurzweil’s predictions have so far proved correct.

But length of life and quality of life are not the same thing. For good quality of life as one ages, there must be optimal retirement options. The default is to stay in one’s current home for as long as possible, or downsize. Some will settle into the quiet life of a retirement village on the urban fringes.




Read more:
How can we best design housing for Australia’s ageing population?


But a growing number of retirees who are leading a more active retirement, perhaps still working part-time, want to live closer to the bright lights of the city. It is here that the next generation of retirement living is becoming established in cities around Australia, New Zealand, Europe and the US.

Driving the trend are well-heeled baby boomers (those born between 1946 and 1964) who have been using technology at home and work for years. For some, technology has been integral to their lives. And it seems it might be integral to the future of retirement living.

Vertical retirement communities

The chair of the NSW inquiry into retirement villages, Kathryn Greiner, recently recommended integrating designated seniors’ apartments in medium or high-rise residential developments where people of all ages live. Experts have said such retirement communities are the “way of the future”.

But the future is already here, as greater numbers of vertical retirement communities in high-rise apartment buildings are being built in inner-urban areas around Australia. They offer high levels of luxury with ready access to the kinds of amenities inner-city dwellers have grown accustomed to.

High-rise retirement villages would typically be equipped with various smart technologies that connect with the larger technological infrastructure of the city.




Read more:
Connecting online can help prevent social isolation in older people


Similar to luxury hotel suites, residents would have a spectrum of in-house services and entertainment options presented via internet-connected smart TVs.
Multimedia suites would be there for augmented or virtual reality experiences – travel and education being among them. In-house cinemas would host movie nights.

The future of retirement living has sophisticated in-house cinemas included.
from www.shutterstock.com

Health care

The way we’re heading, technology-enabled, proactive health management will likely be built into the infrastructure of these retirement villages. It will allow people to stay healthy and live independently at an advanced age, forestalling the time when a move to aged care becomes necessary.

The health-maintenance technology available today means retirees hardly need to leave home for a checkup. Telehealth gives on-demand access to doctors via the internet. Visiting nurses have their role in looking after the elderly at home.

Then there are the dozens of smartphone apps that monitor vital signs, some of which send timely warnings before something becomes a problem.

And while high-rise living may not offer the same access to the outdoors for walking and exercise, technology has other options.

“Exergames” – video games that enable physical activity – are a segment of the computer game industry known to be beneficial to people of all ages, including the elderly. Exergames lend themselves well to vertical communities by not needing much space. They are played either alone or with friends in self-contained virtual environments.

In the future, yoga can be practised in a self-contained, virtual environment.
from www.shutterstock.com

Apart from the physical benefits of exercise, exergames have also been shown to improve mental alertness, balance and coordination, all of which contributes to fewer injuries common to the elderly, such as fractured hips from falling.




Read more:
Why hip fractures in the elderly are often a death sentence


Good help is not hard to find now with assistive technologies like Google’s Duplex. These personal assistants fit right into the high-tech home and allow people, wherever they live, to stay independent for longer.

The assistant can keep your diary, make appointments over the phone, buy flowers and have them delivered, turn on the lights, call a taxi and more. Autonomy aids like this could delay the transition to aged care.

A win-win

High-rise apartments are a thorny issue in suburban neighbourhoods, regardless of who is living in them. There are already some objections to high-rise aged-care facilities. But these mainly come from existing low-rise residents who are not happy to have any high-rise buildings in their neighbourhood.

Some are concerned that high-rise communities will lead to social isolation. Traffic congestion is also a concern.

When managed well in an architectural and town planning sense, vertical communities offer high-quality living while occupying a smaller urban footprint than a hundred detached dwellings. They can help reverse the urban sprawl of Australian cities, which are among the largest and least densely settled in the world. We love our big suburban houses, but they do consume vast tracts of countryside.

The ConversationPeople want to live out their days in the freedom of their own home, not in an institution, no matter how benevolent. And it’s in the national interest to relieve pressure on the public health system. Emerging health-optimising technology and vertical communities can enable this. It’s a win-win.

David Tuffley, Senior Lecturer in Applied Ethics and Socio-Technical Studies, School of ICT., Griffith University

This article was originally published on The Conversation. Read the original article.

Why mandatory retirement ages should be a thing of the past


Alysia Blackham, University of Melbourne

Mandatory retirement ages are – rightly – mostly a thing of the past in Australia. But they still linger both formally and informally in some sectors and roles. This is of major concern for a country with an ageing population, such as Australia.

Compulsory retirement ages have been progressively prohibited in Australia since the 1990s. There are good reasons for this: reliance on irrational stereotypes about older workers can prevent businesses from finding the best person for the job. Allowing workers to choose when they retire can improve staff retention, increase workforce morale, and help employers retain vital skills and experience.

At a national level, prohibiting mandatory retirement can help relieve the burden of an ageing workforce on pension systems. It also promotes labour market supply and removes barriers to older people participating in society.




Read more:
Keeping mature-age workers on the job


Abolishing mandatory retirement can reduce welfare expenditure and increase self-reliance. Importantly, it recognises the inherent worth and dignity of workers of all ages, and sends a strong national message about the importance of ending age discrimination.

Where mandatory retirement remains

Federal Australian judges must retire at the age of 70, as outlined in section 72 of the Australian Constitution. While section 72 does not generally apply to state or territory courts, all states and territories also impose a retirement age for their judges. These range between ages 65 and 72.

The Australian Defence Force has also maintained a mandatory retirement age of 60 for personnel and 65 for reservists, though this can be extended on a case-by-case basis.

In Australia, federal court judges have a mandatory retirement age of 70.
Shutterstock

Overseas, some countries still allow mandatory retirement. The UK, for example, allows employers to justify a mandatory retirement age for their workforce. The UK Supreme Court has identified two broad categories of legimitate justification: intergenerational fairness and dignity.

Retirement provisions have been retained by some UK universities, including Oxford and Cambridge. These organisations have claimed that retirement ages are justified by very low turnover, which may limit progression for other staff. They also cite the need to increase staff diversity, refresh the workforce, and facilitate succession planning.




Read more:
How we could make the retirement system more sustainable


My research on how Australian universities are operating without mandatory retirement shows that there has been an increase in the number of academics working longer. The percentage of total academic staff at Australian universities aged over 64 increased from 0.96% in 1997 to 4.66% in 2012.

Extending academics’ working lives may be affecting the employment prospects of younger academics, particularly in relation to the availability of permanent academic posts at junior levels. Overall, though, there have been few negative impacts from the removal of mandatory retirement ages in universities.

I found Australian universities value the experience and skills of their older academic workforce, and explicitly reject any link between age and declining performance.

Judicial retirement ages

Even for the judiciary, mandatory retirement ages are outdated and inefficient. When they were introduced at the federal level in 1977, retirement ages were intended to “contemporise” the courts by introducing new people and ideas. They were designed to prevent declining performance on the bench and provide opportunities for younger judges.

But the workforce and our attitudes to older workers have changed since 1977. My research found that mandatory retirement ages for judges are inconsistent with modern workplace practices and are contrary to the desire for age equality. There is no evidence that older judges are “out of touch”, and age is a bad predictor of individual capacity.

Instead, judicial retirement ages may deprive the courts of expertise and experience. Retirement ages also appear to be contrary to the wishes of judges themselves. Justice Graham Bell, who retired from the Family Court of Australia on 20 February 2015, was quoted as saying:

These days 70 is equal to 60 or 55. … Judges should be able to go on till 80 provided they pass a medical inspection. After all, the pension makes judges pretty expensive creatures in retirement. They are sent out to pasture too early.

What’s more, judicial retirement ages are largely unnecessary in practice. Judges are entitled to generous pensions and often retire of their own accord. New judges will still be given opportunities even if we remove mandatory retirement ages.

Informal retirement pressures

Where mandatory retirement has been officially removed, there can still be pressure to retire at a certain age. My research found that some Australian universities may be using potentially discriminatory methods (such as redundancy) to manage an ageing workforce.

A significant proportion of older Australian workers report experiencing age discrimination. In 2014, over a quarter (27%) of Australians aged 50 years and over reported experiencing age discrimination in employment in the last two years.

Given these findings, in 2016 the Australian Human Rights Commission (AHRC) conducted a national inquiry into discrimination against older workers. It recommended a suite of changes including discrimination law reforms and appointing a cabinet minister for longevity.




Read more:
Age discrimination in the workplace happening to people as young as 45: study


Previous studies have suggested that declining numbers of older men in the workforce are mostly due to employer constraints, not constraints on the part of older workers. This suggests the need for a shift in employers’ attitudes towards older workers, to encourage continued participation.

Why mandatory retirement ages are inefficient

With an ageing population, Australia cannot afford to lose skilled workers prematurely. In 2013, the Productivity Commission estimated that overall labour supply per capita will fall by nearly 5% by 2059–60 due to demographic ageing. The commission concluded that:

A period of truly diminished outcomes is likely to be at hand, unless luck or appropriate policy initiatives intervene.

The ConversationOne of the key policy measures available to address this looming issue is to increase workforce participation rates for older workers. Eliminating the last vestiges of mandatory retirement is an obvious first step.

Alysia Blackham, Senior Lecturer in Law and ARC Discovery Early Career Research Fellow, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Australia is one of the world’s best places to retire, or is it?



File 20180329 189795 kzxsmm.jpg?ixlib=rb 1.1
Happiness in retirement isn’t the same for everyone.
Tom Carmony/Flickr, CC BY-NC-ND

Rafal Chomik, UNSW and David Rodgers, UNSW

Australia is ranked in the top third of countries in almost all indices measuring the best countries to retire, according to our analysis of nine separate ageing and retirement indices.

The problem is, experts contriving such indices can’t agree about which ingredients should be included and which are most important.

The flaw of averages

While composite ageing indices provide us with what appear as simple comparisons, the underlying methodologies are complex, prone to judgement, and can be tweaked to obtain certain results.

Using indicators that aggregate outcomes for the older population within a country also ignores differences between people within this population. Sub-indices by gender and more granular age-groups do exist, but one improvement could include an inequality adjustment based on outcomes by socioeconomic status or income.

What about just asking people about their life? Studies that compare differences in people’s own evaluations of life across countries show these are substantially explained by social and economic differences across countries. And when comparing individuals in high-income countries such as Australia and Britain, good physical and mental health appear most correlated with life satisfaction, while in middle-income countries like Indonesia, income is more important.

But that doesn’t differentiate by age. When the OECD asked older people across rich countries what mattered to them, they said that “health” and “environment” were most important while “civic engagement”, “community” and “income” domains were less so. By contrast, younger groups attributed less weight to “environment” and more to “income”.

Such indices usually involve scoring a country in several categories and combining these into a composite score and ranking. Done well, these can reveal how life in one location is better than another and in which categories it is lagging.

So what do existing indices suggest is important for older people’s well-being? And which countries come out on top?

Ingredients for a good old age

The ingredients used in an overall index differ, ranging from the employment rates of older people in each country, to their political participation, income, levels of exercise, and life expectancy.

These indicators and weights are often chosen subjectively by experts constructing each index. Some comparisons focus on current standards of living and comprise social, environmental, health, and economic indicators. These are probably more immediately relevant to people.

By contrast, indices that aim to measure the likely future for older people mostly comprise financial indicators and those that relate to retirement income system design, demography, and economic conditions. These are probably of greater concern for those thinking ahead about the impacts of population ageing.

Where to retire?

Despite the flaws with such comparisons, few people can help themselves. So how does your country rank?

European countries – particularly Nordic ones – are consistently highly ranked across ageing indices (see figure below). Such results reflect their high health outcomes, high incomes, generous social welfare, and comparatively well-designed retirement income systems. These are also countries that top the subjective happiness rankings.

https://cdn.theconversation.com/infographics/251/a4b6d81ee4291bb9594ed94e7418ca580cb214a7/site/index.html

Lower and middle-income countries receive lower rankings from the current well-being indices in which they feature. India and China, where there is low public provision for retirement, occupy high rankings among indices that emphasise fiscal sustainability over the quality of life of older people.

Australia is ranked in the top third of countries in almost all indices. It ranks particularly highly in the Melbourne Mercer Global Pension Index, largely due to the design of its retirement income system.

The ConversationFor what it’s worth, one could take an index of these indices to summarise. Such an index, call it the CEPAR meta-index of ageing, indeed shows Nordic countries taking the top three places, followed by Australia and the US, with the UK coming somewhere in the middle of 25 countries – apparently well ahead of places like France and Italy. Something to ponder when contemplating the good life in old age.

Rafal Chomik, Senior Research Fellow, ARC Centre of Excellence in Population Ageing Research (CEPAR), UNSW and David Rodgers, PhD Student in Economics, UNSW

This article was originally published on The Conversation. Read the original article.