Recently I was contacted by a man approaching retirement age who wanted to know what he could do to ensure eligibility for publicly funded pensions both here and in the UK. It seems that a seven year stint in the British workforce bank in the 1960s led him to believe he might qualify for a double payment.

Leaving aside the morality of someone attempting to receive two government pensions rather than one, this enquiry led to me to consider for how far into the future people in their sixties will be able to rely upon taxpayer support. And the answer is, not for very much longer.

In Australia, many people regard a pension as an entitlement for paying taxes throughout their working lives.

This argument is somewhat disingenuous, however, as the very people who fail to qualify (ie the relatively wealthy) are those who have presumably paid more taxes than others over 45 odd years in the workforce. Pensions should really be based upon need rather than entitlement, and should therefore only go to those suffering from genuine poverty in their old age.

Having said this, there's every reason to think that eligibility criteria in Australia unfortunately will have to be tightened further pretty soon. In the last Federal Budget the Treasurer took the unpopular step of raising the pension age from 65 to 67 over the next fourteen years. Given, however, that a century ago when public pensions were introduced at this age only 10% of people lived to be 65, perhaps the Treasurer should've gone further and raised the entitlement age to at least 75.

Another demographic problem with pensions is that thanks to the current generation not having children at the same rate as the prolific baby boom generation, the ratio of working Australians to retired ones will fall dramatically over the next two decades.

If tax revenues in their existing form prove unable to cope with the number of pension entitled older people, then either taxes must increase (unpopular) or pensions cut (arguably less unpopular, although an interesting political battle will undoubtedly be fought on this issue in years to come).

The final reason why public pension will be cut is a more positive one, and that is our superannuation system. Notwithstanding the recent sharemarket crash, Australians of all ages have contributed massively to their retirement savings since compulsory super was introduced in the early 1990s. Once markets pick up again (and this they will undoubtedly do at some stage over the next two-to-seven years), super balances will resume rising and the collective need for a public pension will decrease.

Just beware, however, of growing calls from a number politicians that our private super savings need to be put to use in building 'worthy' public infrastructure projects (eg the NBN). Such a course of action will do more damage to private pensions than anything wrought by heavy selling
on the share market.