From Saturday, Australians will have to wait until the age of 67 to get the age pension.
The original so-called “retirement age” of 65 for men dates back to 1909.
Women had their pension age lifted from 60 to 65 between 1995 and 2013. And all Australians had it phased out from July 2017, in a process that ended on 1 July 2023.
It happened with little protest – a stark contrast to the demonstrations and riots that rocked France earlier this year, when President Macron proposed and passed laws to lift France’s pension age from 62 until 64.
What is so special about French pensions?
French retirement age strikes and demonstrations are nothing new.
There were nationwide protests when France raised its retirement age from 60 to 62 in 2010, before in 2003, and in 1995, when France tried to raise the pension age for workers. in the public sector.
Just about anything you want to know about public pension schemes in high-income countries can be found in the OECD’s Pension at a Glance report, published every two years, latest in 2021 .
Public pension spending in France is 13.6% of GDP, compared to 4% in Australia.
In part, this is because France has an older population than Australia, but it is also because French pension payments are more generous than Australia’s age pension and superannuation supports combined.
The OECD’s finding that Australia provides a replacement rate of around 40% and France around 74% is “forward looking”, as it is based on what a worker on average income is estimated to be entitled to under the system that applies in 2020, if he works from the age of 22 until the normal retirement age in the country.
For low-wage workers, Australia’s means-tested age pension makes payments as generous as those in France.
A separate 2018 OECD calculation shows that the average after-tax income of a French household headed by a person aged 65 or over is 99.8% of the average income of all households in France.
In contrast, the average after-tax income of an Australian household headed by a person of that age is 75% of all households.
Given that French households receive the same disposable income while retired as they do working, it’s easy to see why they want to retire.
And the heavy tax contributions required to fund their retirement income give them little opportunity to save privately while working.
The level of median private wealth in Australia (converted to prevailing rates) is almost twice that of France.
Read more: France’s pension reform: Macron and demonstrators continue epic fight that began more than 30 years ago
Yet the wealth of French public pensions is enormous. Calculating the value of future pension income streams using life expectancies, the net pension wealth of French retirees amounts to 14 years of average earnings, compared to more than seven in Australia.
Since the value of these income streams is strongly influenced by how long pensions are received, raising the French pension age by two years would reduce the value of French pension wealth by around 8%.
Why is it easier to defer pensions in Australia?
The phase-in of the change in Australia after 2017 means it does not affect the retirement income of Australian workers until many years after the change is announced, and does not affect the income of those who have already retired.
And Australia’s change legislated in 2009 is part of a wider program of reforms that include the largest increases in age and disability pensions and carer payments in Australian history.
Yet it has its downsides. Those who lose the most are those who have the shortest life expectancy. Indigenous men have a life expectancy of almost nine years less than non-Indigenous men and Indigenous women almost eight years less.
Which Australians will pay the highest price?
And the change pushed a large number of Australians aged 65 and over who could have received the pension into Jobseeker’s lowest unemployment payment.
The number of people aged 65 and over receiving JobSeeker has risen from zero in 2017 to 40,300 in May this year – and will rise further due to this month’s change.
These people are seriously disadvantaged by this change, because the level of payment for an elderly person without work is more than $ 300 per fortnight less than the age pension, a gap that will only be reduced slightly by the increases announced in the latest Commonwealth budget.
Very little attention has been given to these people, who because of the low level of payment are among the poorest of the Australian population – with limited prospects of improving their conditions.
In contrast, the idea of increasing income tax on superannuation balances of more than A$3 million has attracted widespread criticism.
The very different institutional environments in Australia and France have created different lobby groups, with different interests to protect.