Are you ready to work until you’re 70? Hockey flags plans to raise retirement age

Australian workers may be required to work until they are 70 years old, with Federal Treasurer Joe Hockey flagging the possibility of the government raising the retirement age for Australian workers in this year’s budget.

In an interview with ABC TV, Hockey said his generation may have to “work for an extra three years and we need to redesign our systems to manage that fact”.

The previous Labor government raised the retirement age from 65 to 67, which will come into effect from 2023. The Australianreports an increase in the retirement age to 70 may not come into effect until 2040.

While many Australian workers will need to work their entire lives out of financial necessity, Pitcher Partners executive director of business advisory and assurance Adrian Fitzpatrick says a further change in the retirement age could be a positive thing for Australian businesses.

“Businesses can benefit from good employees staying on longer with the business,” Fitzpatrick told SmartCompany. “These employees often take on a mentoring role with younger employees and they can help with transitions.”

Fitzpatrick says the change is also a chance for employees to become more engaged in the business, as they have an opportunity to add additional funds to their superannuation savings.

“We often find that people become distracted if they are approaching retirement concerned about their superannuation,” says Fitzpatrick. “Employees who feel secure with their super are often more engaged.”

However, Fitzpatrick says it will be critical for businesses to manage salary expectations for workers who will be working longer. He says working arrangements will also need to be more flexible as older workers seek to balance work commitments with other interests such as travel and family time.

There is also a danger of companies becoming too conservative if they are dominated by older employees, says Fitzpatrick. He says it is important for businesses not to “dampen new business opportunities” that often come from young, entrepreneurial workers.

Hockey has also hinted at a possible change to the way the aged pension is indexed, moving from the current system, which links the pension to the average male weekly earnings, to a system whereby the pension would be linked to the inflation rate.

“I’m not going to speculate on the budget but I will note that … over the last 40 years 60% of male workers in the USA have had a real cut in their incomes,” said Hockey. “In Australia we haven’t had that. Male weekly total earnings have been at a higher rate but it is not always going to be the higher rate.”

Opposition finance spokesperson Tony Burke has criticised the government, which he said would be breaking a pre-election promise if it was to raise the retirement age. Burke told the ABC  the change would hit blue-collar workers the hardest and would be a “very big deal” for individuals with small superannuation savings who may be required to do physical labour for longer.

While the proposed changes are not likely to come into effect any time soon, Fitzpatrick advises businesses owners to sit down with employees who are in their late 50s and early 60s to start planning now. “It’s never too early to start talking about these things,” he says.