1301.0 - Year Book Australia, 2007

ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/01/2007

Page tools: Print

Contents >> Labour >> Article - Retirement and retirement intentions

RETIREMENT AND RETIREMENT INTENTIONS

Since 1995, Australia's estimated resident population aged 45 years and over has increased by 30%. In contrast, the number of children (aged 0-14 years) has increased by 2.3%, and the number of people aged 15-44 years by 4.8%. This uneven distribution of growth reflects the gradual ageing of Australia's population, which inevitably impacts on labour market supply, retirement and income support policies.

It is, therefore, of interest to investigate retirement trends, factors which influence decisions to retire, and the income arrangements retirees and potential retirees have made to provide for their retirement.

Data about retirement and retirement intentions of Australians were collected in the Multi Purpose Household Survey, conducted by the Australian Bureau of Statistics (ABS) from August 2004 to June 2005, as a supplement to the monthly Labour Force Survey.

RETIRED FROM THE LABOUR FORCE

Age at retirement

It is important to note that data on retirement age presented in this article only refer to 'surviving' retirees aged 45 years and over in 2004-05. Therefore, the distribution of retirement age in this population is not representative of the age at which people retire. For example, based on Australian life expectancy, a person who retired aged 40 years in 1979-80 (aged 65 years in 2004-05) would more likely be alive to participate in this survey than a person who retired aged 65 years in 1979-80 (aged 90 years in 2004-05). This effect will be less pronounced for the statistics presented in relation to people who retired recently. However, it will have some effect on all those statistics, particularly as almost 35% of the retired population included in this article retired more than 20 years ago.

The average age at retirement for people who were aged 45 years and over who were recent retirees (those who retired in the last five years) was 60 years. In this group, women retiring were approximately three years younger than men (the average retirement age for men was 61.5 years and 58.3 years for women).

6.28 People who retired in last five years(a), Age at retirement

Reasons for ceasing last job

Among both retired men and women whose last job was less than 20 years ago, the main reason for ceasing their last job was due to 'reaching retirement age/being eligible to receive superannuation or the pension' (34%). Other main reasons for ceasing their last job were 'sickness, injury or ill health' (26%) and 'being retrenched, dismissed or no work available' (11%).

Sources of income during retirement

Of people aged 45 years and over who had retired from the labour force, just over 1.3 million people (44%) reported a government pension or allowance as their main source of income just after retirement (54% of men and 37% of women) (graph 6.29). A further 13% (384,700 people) reported no income source but lived off savings, lump sum payments or other assets, and 366,700 people (12%) reported superannuation or annuity payments (20% of men and 6.3% of women).

Of those retired from the labour force, 42% indicated that their main source of income had changed since retirement. There were almost 2 million people (67% of all those who were retired) who reported that their main source of current income was a government pension or allowance, representing an increase of 50% compared with the number of people who stated it as their main source of income at retirement. This may be due to people reaching the eligible age to receive a pension or allowance during their retirement rather than at the start of their retirement, or due to assets or other sources of income being exhausted. Of those whose current main source of income was a government pension/allowance, 18% of men and 9% of women were claiming the Disability Support Pension.

A large proportion of people whose main source of income at retirement was 'superannuation/annuities' or 'profit/loss from rental properties' continued to rely on them as their main source of current income (67% and 66% respectively).

6.29 PEOPLE WHO HAVE RETIRED FROM LABOUR FORCE, Main source of income(a)

INTENTIONS TO RETIRE FROM THE LABOUR FORCE

Of the 3.7 million people in the labour force aged 45 years and over, 3.4 million (90%) indicated that they intended to retire from the labour force in the future. The remaining 384,400 people indicated that they did not intend to retire from the labour force.

Age intends to retire

Of the 3.4 million people in the labour force who intended to retire from the labour force, almost half (47%) did not know at what age they would retire. Of those who did indicate an intended age:

2.3% intended to retire aged less than 55 years
19% intended to retire aged 55-59 years
31% intended to retire aged 60-64 years
39% intended to retire aged 65-69 years
8.4% intended to retire aged 70 years and over.

The average age at which people intended to retire was 62 years (63 years for men and 61 years for women).

Factors influencing decision about when to retire

Among people in the labour force who intended to retire, the most common factors influencing their decision about when they would retire were personal health or physical abilities (40%), financial security (36%) and reaching the eligible age for an old age or service pension (15%) (graph 6.30).

6.30 PEOPLE IN THE LABOUR FORCE WHO INTEND TO RETIRE, Factors influencing decision of when to retire

Expected main source of income at retirement

There were differences between people who had already retired and those who intended to retire, in terms of the main (expected) source of income at retirement. The main source of income at retirement for almost half (1.3 million people or 44%) of those who had already retired and were 45 years or older, was government pension or allowance, whereas only 25% (854,300 people) of those who intended to retire expected that government pension or allowance would be their main source of income at retirement. Many people intending to retire (1.4 million or 41%) expected superannuation or annuity to be their main source of income at retirement.

Over 90% (or 3.1 million) of the people who were 45 years and over in 2004-05 and who intended to retire had contributed to a superannuation scheme at some time, compared with 55% of people who had retired from the labour force. Such trends reflect changes to superannuation legislation over the last two decades, in particular the Superannuation Guarantee (Administration) Act 1992 (Cwlth), which requires employers to make superannuation contributions for eligible employees.

REFERENCES

Australian Bureau of Statistics, 2006 Retirement and Retirement Intentions, Australia, August 2004 to June 2005 (6238.0), ABS, Canberra
Australian Bureau of Statistics, 2006 Population by Age and Sex, Australian States and Territories, June 2005 (3201.0), ABS, Canberra