Why Australia will spend less on the aged pension – despite the doubling of retirees

Expenditure on old-age pensions will decline despite the aging population, with pension savings doubling over the next forty years.

The cost of old-age pensions will fall from 2.3 to 2 percent of GDP by 2060, despite the fact that the number of people over 65 will double to nine million and the number over 85 will triple, according to the Intergenerational Report 2023 Thursday.

The number of people over 100 will increase sixfold.

But the number of old-age pensioners is expected to fall by 15 percentage points as superbalances increase to nearly 220 percent of GDP by the early 1960s (from 116 percent today).

Some 17 million Australians collectively own $3.5 trillion in super-assets, and people who retire in the mid-1940s are expected to have received the super-guarantee of at least nine per cent throughout their working lives.

So as the pension pool grows, by 2035 Australia is projected to have the lowest share of government spending on pensions of any OECD country.

Treasurer Jim Chalmers called the pension system “intergenerational genius.”

“Super is delivering on its promise of providing a better pension for more Australians and a better budget outcome over the next 40 years,” he said.

Assistant Treasurer Stephen Jones said Australians’ expectations of what is needed for a dignified retirement will change.

“More people are going to expect more,” Jones said.

Older pension ensures that the increased expectations and the increased perceptions of what it means to have a dignified retirement are met, because people save for it throughout their lives.

‘And it works.’