Early retirement from ill health hits Australian superannuation and the economy hard
A new report finds health strategies applied early can recover $1.9 billion in superannuation and $3.9 billion to the economy
- $20.8 billion in superannuation is lost from early retirement due to ill health
- Individuals forced to retire early lose up to $142,100 in superannuation
- Overall impact of early retirement from illness on gross domestic product (GDP) is $45.3 billion
Canberra, Monday 17 September 2018: A unique report launched today has found a staggering $20.8 billion is being lost in superannuation each year due to early retirement from ill health, at a cost of $45.3 billion to GDP. Findings also show implementing effective health strategies for those at risk of early retirement due to ill health, including medicines, has the potential to recover $1.9 billion in super and return $3.9 billion to the economy.
“Our Health Our Wealth: The Impact of Ill Health on Retirement Savings in Australia” is being launched today at Parliament House, Canberra as part of Medicines Australia’s PharmAus18 annual symposium of the health industry.
“What’s clear from this report is early retirement due to ill health is not only hard on individuals, their families and carers, it also hurts the Australian economy,” states Professor Bruce Rasmussen, Director of Victoria University’s Institute of Strategic Economic Studies (VISES) and lead author.
The ageing population presents significant challenges from a health perspective; adding in early retirement from illness places even greater pressure on this inevitable dynamic. The OECD estimates the number of individuals aged 65 years or older relative to those of prime working age (20–64 year olds) is projected to increase across the OECD from 24 per cent in 2005 to 52 per cent in 2050.
The McKell Institute Report found those retiring early (aged 50–54) due to ill health lose up to $142,100 in super – comprising $118,600 in balances foregone and $23,500 in funds withdrawn. The losses are greatest for those retiring at an early age, but even for those retiring in their early 60s, the losses are estimated to be significant. The economic impact of ill health resulting in early retirement is estimated to be $45.3 billion of GDP and is expected to rise to $53.4 billion by 2025.
Conducted by a research team led by Professor Bruce Rasmussen at VISES, the report analysis involved a wide range of data sources from the Australian Bureau of Statistics (ABS) Household Income and Labour Dynamics in Australia (HILDA) survey.
The report estimates close to 300,000 more Australians aged 50–64 would be working if they could be moved from a poor/fair to good/excellent health status.
“Early retirement due to ill health imposes a significant economic cost, almost 4.5 times government expenditure on the Pharmaceutical Benefits Scheme in 2016–2017,”adds Liz de Somer, CEO, Medicines Australia. “It’s very important to consider ways to address this and take action while illness may be more manageable, to retain a person’s ability to function effectively and remain in the workplace” she added.
Health strategies to delay early retirement
Health conditions associated with early retirement include psychological/psychiatric illness – depression and anxiety notably, and musculoskeletal and connective tissue conditions including osteoarthritis, osteoporosis, neck and back problems.
Strategies for those 45 years or over, with psychological or psychiatric conditions (including depression and anxiety) could see the number of Australians seeking early retirement reduced by 19,325 and the cost to the economy reduced by about
20 per cent ($16.3 million).
The report also found that more effective treatment programs and medications for those at risk of early retirement from musculoskeletal and connective tissue conditions, would reduce the number of people retiring early by 8,734 and generate $9.4 million in cost savings.
The total combined economic benefit of addressing these conditions would be
$3.9 billion in annual economic benefit and $1.9 billion in the reduction of lost super.
“Advances in healthcare promise to change the management of disease in the future – particularly the development of new medicines for more difficult to treat illnesses such as cancer, dementia and other neurological conditions,” Liz de Somer adds. “These findings clearly indicate there’s much to be gained in keeping Australians healthy.”
Issued by CUBE on behalf of Medicines Australia. For further details please contact Anne-Marie Sparrow on 0417 421 560 or Alexandra Suvajac on 0419 128 099.
More on the Report: ‘Our Health, Our Wealth: The Impact of Ill Health on Retirement Savings in Australia’ Report is supported by an unconditional grant provided to The McKell Institute by Medicines Australia.
The Victorian Institute of Strategic Economic Studies (VISES) were engaged by The McKell Institute to conduct the research and author the report. Authors include: Professor Bruce Rasmussen – Director of Victoria Institute of Strategic Economic Studies (VISES) at Victoria University; Dr Kim Sweeny – Principal Project Officer;
Alison Welsh – Research Fellow; Neelam Maharaj – Research Fellow
The report set out to quantify the impact of forced retirement due to ill health on individual financial prospects, together with the economic impact on GDP. It also generated actionable recommendations on how to reduce the prevalence of illnesses causing early retirement, improving the financial security of Australia’s retirees and the health of Australia’s economy.
Three core areas were reviewed:
- Current and future economic impact of early retirement due to ill health on GDP
- Impact of forced early retirement on an individual’s financial prospects
- How reducing rates of illness can help reduce the prevalence and economic impact of forced early retirement