Keeping Australia's older workers in the labour force. A policy perspective

Australian Journal of Social Issues, Winter, 2008 by Maggie Walter, Natalie Jackson, Bruce Felmingham

The initial answer to whether older workers are willing to change their retirement plans, therefore, is affirmative: older Australian workers are both aware of Government concerns regarding the impact of population ageing, and prepared to consider remaining in the workforce longer, in line with these concerns.

Whether such willingness to consider will translate into later retirements is less clear. The link between retirement intentions and actual behaviour is muddied by social, financial and personal complexities. The evidence suggests that attitudes towards early retirement are changing in the direction of longer working lives. Recent Australian studies (ABS 2006; NATSEM 2005) find increases in the labour market participation of older workers, especially women, and these results are in line with data from overseas studies (Van Dalen and Henkens 2002). Data also suggest that many older workers, again especially women, do not have sufficient superannuation or financial assets to allow them to leave the workforce (see Olsberg 2004). Conversely, other results suggest that a substantial proportion of older Australian workers still aspire to early retirement (Shacklock and Brunetto 2005; AARP 2005; HILDA 2004). Further, as outlined earlier, retirement is not always a directly selected choice with ill health, family obligations and redundancies leading to unchosen and often earlier than anticipated retirement.

Efficacy of Current Policies

To test current policies aimed at encouraging older workers to defer retirement the ASRAM survey asked specifically about workers' knowledge of, and planned usage of: the Pension Bonus Scheme; transition to retirement measures; and the removal of tax on superannuation payments for workers retiring after the age of 60.

The Pension Bonus Scheme

The Pension Bonus Scheme (PBS), pays a lump sum tax free bonus to those who defer claiming (and are entitled to claim) an Age Pension for at least one year and continue to work at least 960 hours of 'gainful' work each year (Centrelink 2007c). Claimants must register as a member of the scheme and the bonus is paid as a non-taxable lump sum once the Age Pension claim is eventually lodged. The bonus amount depends on the deferment duration, the amount of Age Pension due and partnered status. The maximum payable for an individual is currently $1283.30 for a one year deferment rising to $32083.60 for the maximum five year deferral.

Despite the length of time that the PBS has been in operation, only one quarter of respondents are aware of its existence. As shown in Figure 2, while awareness does increase significantly by age with those workers in the oldest age bracket, most likely to be aware of the PBS, even among this group, awareness remains below 40 percent. Among those few who are aware of the PBS (n=923), less than half indicated that the Scheme is very likely (10%) or likely (30%) to persuade them to remain in the workforce past age 65. It would appear, therefore, that while older Australian workers are prepared to change their retirement plans, the Pension Bonus Scheme is currently having little impact on such intentions.