Australia’s ageing population - Financial Services Council.pdfVIP

FSC Deloitte Future Leaders Award 2013 Australia’s ageing population What existing policy settings could be changed, or new polices implemented, to better insulate Australia from the future economic impacts of an ageing population? Dragan Savic 12 August 2013 Australia’s population is ageing and the resulting changes in the demographic structure of the country will bring about significant challenges for policy makers . This paper examines policy settings relating to the retirement system and financial services industry that will reduce the future economic impacts of population ageing in Australia. The ageing population will slow economic growth due to falling participation rates and lower discretionary spending by retirees. Together with sluggish economic growth, there will be a lower tax pool from which to fund increasing government spending on the Age Pension and healthcare. This will result in a fiscal gap in the Federal budget placing further strain on the economy through higher taxes and debt. To reduce the impact of an ageing population, the goal of policy settings should be to maximize private retirement savings through superannuation and increase the incidence of self-funded retirement. This will reduce spending on the Age Pension and in turn the budgetary fiscal gap. To achieve this, policy settings should increase compulsory and voluntary contributions to superannuation. The preservation age and Age Pension eligibility age need to increase to encourage deferral of retirement. Policies should ensure optimal use of superannuation savings post retirement through annuity products and increase capacity to privately fund health expenditure through supera