Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 60

Status, longevity and the age pension

Policy makers seem to overlook the fact that people of higher socio-economic status have longer life times. Unfortunately, there is little data from Australia to study this effect. It requires greater study considering the impact on financial planning for the high socio-economic client and the topical issue of increasing the age pension entitlement age.

Socio-economic status

Until 2005, the UK Office of Statistics published separate mortality tables every five years for six different occupational classifications. This is the best public mortality data set available at a national level related to socio-economic status. The classifications range from Class 1 (‘Professional’) to Class V (‘Unskilled’). The difference in average life expectancy from age 65 for these two classifications was 4.2 years for males and 4.3 years for females in the 2005 data. Since the first data in 1976, life expectancy increased more for higher status than for lower status.

There are a range of possible explanations. Unskilled occupations may have involved greater risk and lead to health problems in later life. Professionals may have developed better diet and health care habits that extend into later life. However there are deeper dimensions and career experiences within occupations.

Someone who has studied these deeper dimensions is Sir Michael Marmot. Originally from Australia where he graduated in medicine in 1968, he became an international expert in longitudinal studies of health and longevity. His book, ‘Status Syndrome’, published in 2004, is a comprehensive coverage of his work in a field that might be labelled psychosocial effects on health and longevity. My conclusions from Marmot’s work are that whilst health status and income are significant determinants of longevity, differences in longevity in later life are also due to the level of autonomy and engagement people have enjoyed in their careers.

A first implication of these conclusions is that financial planners lucky enough to capture clients with these fortunate career attributes as well as financial self sufficiency, need to factor in a substantially longer life time (and future improvement) than population averages.

A second implication relates to how age pension policy is being managed. In current public debate it is an easy logic to argue something like “since the age pension started in 1909, average life expectancy has increased by 25 years so we need to keep updating the age pension entitlement age”. Average life expectancy is a neat tool for this argument; however it ignores the dimensions around this average of people with different status.

For example, women now in their 50’s and 60’s who through child rearing and divorce may have had little opportunity to enjoy autonomous and engaging careers may have little in the way of superannuation and financial assets. Waiting until age 67 or 70 for the age pension, with limited employment opportunities and below subsistence unemployment benefits, is not a satisfactory situation. Similar arguments could be applied to manual workers who physically struggle to continue occupations past age 60.

A more sophisticated approach

A better approach to age pension reform than just increasing the eligibility age for all would be to apply a more sophisticated status and financial means test from say age 60. This could be blended proportionately with a different status and means test applying fully from say age 80. Full pension rates might be different in the age 60 and 80 formulae. This approach could accommodate full inclusion of home value and (non-annuitised) superannuation assets with greater public acceptance. Let’s stop treating people as if they’re all the same when they reach age 70.

Editor’s Note: For additional material on this subject from the Wall Street Journal, 18 April 2014, see ‘The Richer You Are, the Older You’ll Get.’

 

Bruce Gregor is an actuary and demographic researcher at Financial Demographics and established the website www.findem.com.au.

 

  •   2 May 2014
  • 1
  •      
  •   

RELATED ARTICLES

A brighter view of dependency ratios

Let's ditch the idea of retirement

French fight pension age rise while Aussies work on

banner

Most viewed in recent weeks

Australian stocks will crush housing over the next decade, 2025 edition

Two years ago, I wrote an article suggesting that the odds favoured ASX shares easily outperforming residential property over the next decade. Here’s an update on where things stand today.

Building a lazy ETF portfolio in 2026

What are the best ways to build a simple portfolio from scratch? I’ve addressed this issue before but think it’s worth revisiting given markets and the world have since changed, throwing up new challenges and things to consider.

Get set for a bumpy 2026

At this time last year, I forecast that 2025 would likely be a positive year given strong economic prospects and disinflation. The outlook for this year is less clear cut and here is what investors should do.

Meg on SMSFs: First glimpse of revised Division 296 tax

Treasury has released draft legislation for a new version of the controversial $3 million super tax. It's a significant improvement on the original proposal but there are some stings in the tail.

Property versus shares - a practical guide for investors

I’ve been comparing property and shares for decades and while both have their place, the differences are stark. When tax, costs, and liquidity are weighed, property looks less compelling than its reputation suggests.

10 fearless forecasts for 2026

The predictions include dividends will outstrip growth as a source of Australian equity returns, US market performance will be underwhelming, while US government bonds will beat gold.

Latest Updates

Economy

Ray Dalio on 2025’s real story, Trump, and what’s next

The renowned investor says 2025’s real story wasn’t AI or US stocks but the shift away from American assets and a collapse in the value of money. And he outlines how to best position portfolios for what’s ahead.

Superannuation

No, Division 296 does not tax franking credits twice

Claims that Division 296 double-taxes franking credits misunderstand imputation: franking credits are SMSF income, not company tax, and ensure earnings are taxed once at the correct rate.

Investment strategies

Who will get left holding the banks?

For the first time in decades, the Big 4 banks have real competition in home loans. Macquarie is quickly gain market share, which threatens both the earnings and dividends of the major banks in the years ahead.

Investment strategies

AI economic scenarios: revolutionary growth, or recessionary bubble?

Investor focus is turning increasingly to AI-related risks: is it a bubble about to burst, tipping the US into recession? Or is it the onset of a third industrial revolution? And what would either scenario mean for markets?

Investment strategies

The long-term case for compounders

Cyclical stocks surge in upswings but falter in downturns. Compounders - reliable, scalable, resilient businesses - offer smoother, superior returns over the full investment cycle for patient investors.

Property

AREITs are not as passive as you may think

A-REITs are often viewed as passive rental vehicles, but today’s index tells a different story. Development and funds management now dominate earnings, materially increasing volatility and risk for the sector.

Australia’s quiet dairy boom — and the investment opportunity

Dairy farming offers real asset exposure, steady income and long-term growth, yet remains overlooked by investors seeking diversification beyond traditional asset classes.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.