Australia Raises Pension Age, Tax Rates for Rich Retirees
May 12, 2009
Australia will raise the age citizens can qualify for a government pension for the first time in 100 years and cut tax benefits to some retirees to fund an increase in weekly payments to the elderly.
Australia will raise the pension age to 67 from 65 by 2023, reduce retirement tax benefits for higher-paid individuals and stop matching contributions to low- and middle-income earners to pay for a A$32.49 ($24.70) weekly increase for 3.3 million pensioners, Treasurer Wayne Swan said in his annual budget released in Canberra today.
Australia joins other nations, including the U.S. and U.K., in raising age eligibility for government pensions as their populations grow older. Australia, which set the pension age at 65 in 1909, has the fourth-highest life expectancy in the world, placing more demand on the nation's health system and economy.
``We have to put in place an essential reform to face this demographic timebomb,'' Swan told reporters today. ``I am sure these changes will be very unpopular, but we need a sustainable pension and retirement-income system.''
By 2023, Australia's pension age will match those of the U.S. and Germany. The U.K. pension age is 68.
Australia will also cut tax breaks for workers saving for their retirement. The amount people can contribute to pension funds at a discounted 15 percent tax rate will be halved to A$50,000 for people aged over 50 and to A$25,000 for younger workers. The cuts will save some A$2.8 billion in the next four years.
The government will also scale back a system of matching what low- and middle-income earners contribute to their retirement funds.
The amount of matching funds from the government will be cut to A$1,000 from A$1,500 until 2011-12, then A$1,250 in the two following years before returning to A$1,500 in 2014-15. The move will save A$1.4 billion by 2012-13 and applies to people earning less than A$62,000.
As a result of the changes, the government can increase the single aged weekly pension by A$32.49 a week beginning Sept. 20 to A$336.68.
``This delivers a stronger and fairer pension system and the reform is long overdue,'' Swan said.
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