Australians’ reliance on the age pension is an indictment of financial literacy levels and requires significant change in the education system, an investment service has said.
Propertyology managing director Simon Pressley has issued a strongly-worded condemnation of Australia’s education system, arguing that Australians’ dependence on the age pension comes down to poor levels of financial literacy, which has manifested thanks to poor financial education.
His comments come as the federal government announces a new financial literacy body, which will provide grants to appropriate groups in a bid to boost Australians’ financial capabilities.
Speaking to Nest Egg sister site Smart Property Investment, Mr Pressley said, “We don't need to create a department for [financial literacy], the department is already there. It's called the education department.
“Put whatever amount of money they're budgeting for financial literacy … and whatever other resources into the education system and hold them accountable, make them show each year what they did with their money.”
He said children should be learning about budgeting, compounding interest, basic investment principles like the importance of time in the market and superannuation.
Mr Pressley argued that someone who can work for 45 years without saving enough for retirement should be considered a “financial failure”, but when it’s a society-wide problem, it goes beyond the individual.
“We've got a population of 25 million people and most end up in the same situation,” he said.
According to the Actuaries Institute’s Michael Rice, 39 per cent of retired Australians receive a full pension, while 24 per cent receive a part pension. According to Mr Pressley’s analysis, that’s closer to 82 per cent.
“There's always going to be a need for the age pension, but when you've got 82 per cent of the population reliant on it … we can’t say 82 per cent of people aren't smart, or they don't work hard enoughc
“It's just that we haven't been taught to prioritise things properly, and the importance of not doing that … pisses me off.”
Mr Pressley stressed that this wasn’t a criticism of pensioners, but rather of a society that allowed financial illiteracy to flourish.
“We've created this society where most people are financially illiterate, it's just that few people want to admit it,” he said.
“Anyone around us is equally illiterate, so we probably don't see ourselves as doing badly, because we're compared to [people] equally bad with money.”
Imagine what we could do with the money
Stronger financial education and subsequent reduced pressure on the age pension would see billions of dollars freed up for public spending, Mr Pressley argued.
The Actuaries Institute priced the annual cost of the age pension to be 44.47 billion in 2017. Mr Pressley argued it could soon hit $50 billion and suggested even a small sliver of money saved would mean improved hospitals, roads and other infrastructure.
“The bigger picture is not just how much we're paying on age pensions each ... It's: 'What else can we do with all of that money?'” he said.
“It's not that the governments don't want to fund more public transport or don't agree that it's important, it's not that they disagree that our health system is buggered and we don't have enough hospital beds and that sort of stuff, they've got no money!
“The money is already there, but it's just going places that have no choice because we don't teach financial literacy.”
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