Increasing pension access age to 70 should only happen if we improve health adjusted life expectancy
In Alexandre Dumas’ famous novel, Man in the Iron Mask, Porthos, the musketeer known for his colossal strength passes away after heroically saving his fellow musketeers. Porthos dies, not via the sword of an enemy, but because his body fails him. Dumas writes “All at once, his knees buckled— they felt empty— and his legs softened under him! “Uh-oh!” he muttered in surprise. “My fatigue is tripping me up. I can’t walk. What’s wrong?” Dumas went on to write, “Oh!” replied the giant, making a supreme effort, uselessly tensing all the muscles in his body. “I can’t!” And uttering those words, he fell to his knees…..”
Fantastic fiction, but I am afraid that is just it. Fiction. The reality is that this is not how people live out their final years although we are setting national policy as if it was.
The age at which governments set access to old age pensions has always had an element of politics and guesswork. Germany’s Otto von Bismark, who introduced the first age pension in 1889 did so out of fear of the growth of socialism, introducing bills at the same time as legislation that sought to ban the emerging socialist parties. Bismark set access to the age pension at 70 when life expectancy was 72. The clear policy intent was that the pension would not cost the German government much because people would not live long enough to enjoy it.
But the current debate on increasing the Age Pension access age to 70 should not be based on politics and guesswork, but data.
Evidence from the Institute for Health Metrics and Evaluation (IHME) at the University of Washington is demonstrating that whilst we may be living longer, we are not healthy as we age.
IHME coordinated the Global Burden of Disease Study 2013 which estimates the burden of diseases, injuries, and risk factors globally for 188 countries. The study’s data on Years Lived with Disability (YLD) is particularly important. For Australia, whilst life expectancy at birth has increased from 76.9 years in 1990 to 81.5 in 2010, health-adjusted life expectancy at birth has increased from 66.4 years in 1990 to 70.1 in 2010.
Health adjusted life expectancy is of particular relevance to the current debate on access to the old age pension. It represents the age at which an individual is able to work productively. Unlike Dumas’ Porthos who worked like a titan until the moment his body collapsed, the evidence suggests that working up to 70 is simply not going to be an option for many.
The Global Burden of Disease Study reveal that the major causes of Years Lived with Disability (YLDs) in Australia are heart disease, low back pain, and pulmonary disease with diet and tobacco smoking the two major contributors. The key issue for policy makers to consider is that increasing the access to the Age Pension to 70, will not increase workforce participation. We will either see people moving onto disability support pensions, or accessing their superannuation to fund their exit from the workforce – which ill-health means will not be a choice.
If as a nation we do want to increase the nation’s productivity by getting people to work longer, then our key focus must be on the factors that are leading to ill health. Reducing smoking and improving diet should be seen as a major levers in enhancing national productivity. The good news is that Australia ranks well on health adjusted life expectancy. We should view this as a competitive advantage and focus on ways to increase this advantage.
We do need a debate on increasing the age pension but it must be focused on improving productivity not on delivering short term Budget savings. At the moment our debate would make Dumas, regarded as one of the fathers of modern fiction, proud.
Global Burden of Disease Study
Alexandre Dumas, The Man in the Iron Mask (Penguin Classics) (p. 387). Penguin Publishing Group. Kindle Edition.