Abbott may have to cut pension to deliver surplus

THE Abbott Government's single biggest welfare expense, the $40 billion aged pension, may need to be drastically cut back to ensure any future surplus for the federal budget.

Reports on Sunday in News Limited papers indicated the government's Commission of Audit has recommended Australians work longer before claiming the pension.

It also calls for a review of the indexation arrangements for the pension, as Australia's ageing population threatens to blow out the cost of the welfare payment by up to 80% in 10 years.

While a review of welfare payments ordered by Social Services Minister Kevin Andrews specifically ruled out any changes, pressure is mounting on the government to consider changes.

Treasurer Joe Hockey has not publicly indicated the aged pension could be on the chopping block for the May budget, but has said all Australians would need to help do "the heavy lifting".

Mr Hockey has also previously backed calls for extending the retirement age to 70, up from the expected retirement age of 67 come 2023, but no changes have yet been made.