LET PENSIONERS WORK | Letter by Ian Henschke, National Seniors Australia chief advocate

Letter courtesy of the Daily Advertiser.

Whether by choice or circumstance, there are many benefits of working in retirement.

Working longer promotes better financial health and better physical and mental health. Right now, it’s critical we get the balance between government payments, paid employment and superannuation right. Solving the nation’s problems depends on it.

There are many factors to consider as we face the challenges of COVID. We’ve shut our borders, but desperately need more workers. Job vacancies are at an all-time high in the care sector (child, disability, health and ageing), the services and construction industries and in agriculture. One answer is to keep more older workers in the workforce and to encourage retirees to come back, preferably a few days a week.

In New Zealand, workforce participation among pensioners is a whopping 25 per cent. Here it’s less than 3 per cent. Part of the reason for this disparity is that Kiwis don’t lose their pension when they work, they simply pay tax. The pension system in Australia imposes a high tax on the income of pensioners, discouraging them from work or working more than a day a week. The cold fact is, if you earn more than $240 a week, you lose $0.50 in the dollar. That means a single pensioner can only earn $7,800 a year before they start losing their pension. If you earn more than $32,000 (including your pension) then you pay tax too! As an Albury taxi driver told me “I’d love to work more but it’s not worth it. They’re begging me to do more. First, they cut your pension and then you’ve got to deal with all the paperwork.”

I heard a different but similar story from a mini-bus driver who drove me to the Gold Coast Convention Centre last year. He was 74, worked 36 hours a week driving six days a week and had lost his pension and all his concessions a few years ago when the company kept increasing his hours.

He had less than $100,000 in super and was paid $25/hr, so was earning about $42,000 after tax. If he took a full pension and just did one day a week, he’d get almost $33,000. So, he was working for a bit under $6 an hour for his extra hours.
As you can see, there is very little incentive to work more than a day a week past pension age. There’s no logic to this system of payments and penalties.

Why should a pensioner pay more tax than Gina Rinehart? And she’s recently come out strongly against this unfair system.
How can we fix it? We need to remove the disincentives in our tax and transfer system.

One way, is to introduce a universal pension. While some argue we shouldn’t give wealthy people a pension, there are ways to ensure they pay it back via the tax system. That’s what they do in a host of other countries. At the very least, we should have a cost/benefit analysis of this idea ASAP.

Another option is to adjust the way we treat employment income in the pension income test. Government could exempt work income from the income test for those with limited savings. This would boost their income and savings in retirement. If we change this and encourage – not discourage – the participation of older workers, it will boost the nation’s productivity. Josh Frydenberg needs to act now. You’ve got a budget coming up, so it’s time to show some common sense and fix it. With an election looming, Anthony Albanese and Jim Chalmers should consider it too. The grey army of new workers will help build a better future.

Ian Henschke, National Seniors Australia chief advocate