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Retirement Income - Fact Sheet

The Greens have reached an agreement with the government to reverse an unfair Howard-era decision on pensions, and secured a much needed review into retirement incomes. Our agreement means that pension payments will be more targeted to those who need the most support.

The Greens support a retirement income system that allows everyone to live with dignity. We support a retirement income system that will care for Older Australians and would protect those who are unable to build a health super balance from poverty in their old-age as well as providing the means by which individuals can save for their retirement thorough a superannuation system.

What is the change?

The level of assets that a person has, such as property, super, shares and money in the bank determines how much pension they get (the family home is exempt). At the moment, the pensions asset test allows couples with as much as $1.1 million dollars in assets on top of the family home to qualify for a Part Pension. 

Two things have been changed:

Minimum Threshold: The amount of assets you can hold before you go from a full-pension to a part-pension will be increased, so more people with modest assets will receive higher part-pensions. 

Taper rate: The rate at which pensions are reduced once you pass the minimum threshold will increase (from $1.50 to $3). This means that those with substantial assets will get smaller payments from the Government. The pension cuts out for a couple (with their own home) if they have more than $823,000 of assets on top of their home value. At the other end of the scale, a couple (with their own home) can hold an additional $50,000 before their full pension is reduced (an increases from $400,000 to $450,000). 

Reasons to support these measures:

1 / More Australians who don’t have the advantage of a healthy super balance will be able to access a full or part pension  

2 / Creates a fairer system by reversing Howard’s 2007 measures (which the Greens opposed) that gave high income earners a more generous retirement income

3 / As part of the Agreement, we secured a broader review of retirement incomes; particularly looking at the interaction between pensions, superannuation, taxation and employment

4 / This is an outcome that stakeholders including the Council of the Ageing, Uniting Care and ACOSS have been seeking for a long time

5 / We are a caring society and all older Australians deserve the best possible retirement. With this agreement we have helped ensure a pathway to a decent retirement for everyone.

6 / We’re building on a decade of work by the Greens to improve retirement incomes for all Australians. We’re keeping superannuation on the national agenda and ensuring it gets proper consideration in the Tax Review. 

Impact of the measure

In the first instance, 171,500 pensioners will benefit (50,000 more people will now get a full pension). Those with fewer assets, who benefit from this scheme, will on average be about $30 a fortnight better off.  327,300 will be negatively affected (90,000 of these will have their pension cancelled). 

80% of all age pensioners will not be affected at all. 

- Of all pensioners (veterans, disability, age) only 2% will have their pension cancelled, 6% will have their pension reduced and 4% will have their pension increased.

- Of age pensioners, only 3.2% will have their pension cancelled, 8% will have their pension reduced and 6% will have their pension increased.

Seniors Health Care Card

The 2% of pensioners who will have their part pensions cancelled will still be eligible for a Seniors Health Care Card. Holders of Commonwealth Seniors Health Cards receive the same concessional rate on pharmaceutical benefits, the lower extended Medicare safety net threshold, and bulk-billed doctors’ appointments without the discretion of the doctor, as for pensioners.

Most state concessions are available to all health card holders, regardless of the card type.

The role of savings in retirement

Superannuation is designed to ensure that people save throughout their life for their retirement. It is the intention of the policy that people who have accumulated wealth can use this to help fund their retirement needs, while those with more modest means can rest assured they too will be able to have a dignified life in retirement by relying on the aged pension. 

It is absolutely appropriate that individuals draw down on their super over the course of their retirement.

Improvement on cruel indexation measure

The new pension reform plan replaces last year’s cruel pension indexation measure which would have hurt those on low incomes by linking pension increases to CPI instead of wages. This indexation change would have seen the 62% of age pensioners, who retire with little or no assets apart from their home, slugged the hardest. These pensioners would have lost $80 a week from their payment by 2050. This was unacceptable.

Superannuation tax concessions are not creating a sustainable system for the future

There has already been a lot of evidence provided to the Tax Review which shows that one third of all superannuation tax concessions are going to the top 10% of earners. This means that the well off are able to get richer, while those in lower and moderate income jobs are unlikely to have enough to retire comfortably.  A range of submissions to the Tax Review has already demonstrated that a number of people will be unable to retire comfortably if we do not make structural changes to how people save for the future during their working life. 

Women in particular are poorly served by our current arrangements and the numbers affected are likely to increase over time. 

Are you someone who could be affected? 

This measure does not come into effect until January 2017, so there is plenty of time for people to make changes to their personal situation.  A number of organisations have tried to model the effects of the pension changes. They have used a range of figures to achieve this assessment. It is important that individuals get appropriate advice, tailored to their situation.  Centrelink provides a phone service for people to better understand the changes. We strongly encourage individuals to seek professional advice that takes into account their exact circumstances. 

What’s in the review?

The review is an addition to the Tax White Paper process that will give special consideration to retirement incomes – particularly the interaction between the age pension, superannuation, taxation and employment, including broken work patterns.

Some claims and misconceptions 

The claim - That some people will lose $8,000 a year. 
The truth  - These are people who both own their own home and have at least $550,000 (half a million!) in assets as well. The superannuation system was designed to help people pay for their own retirement if they can, while the Government takes care of those who don’t have any assets by making sure they can have a decent retirement as well.

The claim - That this measure will lead to worse outcomes for women
The truth - The real pain for women is the inadequacy of the superannuation system. The Greens have now secured a review of retirement incomes that will ensure it stays on the political agenda and that all parties will be forced to address this problem. 

 

Not sure how these changes may affect you? Download the PDFs below for more information:

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