Marnie Banger
(Australian Associated Press)

Regularly changing the age older people can start receiving a pension, to reflect changes in life expectancy, could help make Australia’s pension system more sustainable.

That’s according to the number-crunchers at the Actuaries Institute, who have canvassed the idea in a new report focused on retirement savings.

They say at the moment, the increases in average life expectancy mean people receive the age pension for an average of almost 20 years.

That compares to 1909, when people received the age pension for an average of 12 years.

So far, the growing length of time people have been claiming the payment has been offset by people drawing down on their superannuation and changes to the age pension means test.

But the time people get the pension is expected to further increase.

To make the system more sustainable, the institute’s report suggests governments could link changes in the age people becoming eligible for the pension to changes in life expectancy.

“Linking the two ages would also provide greater certainty to the public as changes in the age pension eligibility age would be determined objectively,” the report states.

Noting the unpopularity of lifting the pension eligibility age – which will be uniformly 67 by 2023 – the actuaries said the link wouldn’t need to be “one-for-one”.

“The linkage could, for example, be that for every year life expectancy increases, there is a six month increase in the age pension eligibility age.”

The report also floats the idea of reducing the gap between when people are able to access their superannuation – currently between 55 and 60 – and the age pension, to something such as five years.

The risk experts have also urged the Morrison government to consider better integrating the age pension, superannuation and aged care, as it reviews Australia’s retirement savings system.

The current system compares well to those in other nations but has “obvious short-comings”, they say.

“The system is complex, intrusive, contains anomalies, produces perverse incentives and is sometimes unfair,” it states.

An example it has given of unfairness is people with tens of million of dollars having the cash taxed at the concessional rates of 15 per cent for superannuation and 10 per cent on capital gains.

That could be addressed by capping the amount held in superannuation or making people with large balances pay more tax, they believe.

Actuaries Institute President Nicolette Rubinsztein said it’s important to make the retirement savings system better-integrated now because its current flaws will become more obvious as challenges take hold.

They include an ageing population, maturing superannuation system, and changing patterns of home ownership and work.

“All of these will aggravate the inconsistencies that stem from a lack of appropriate integration between the various components and undermine the potential for a dignified life for all retirees,” she said.