Fixing pension poverty is the main issue

The 2019 federal election may not have been officially ‘called’, but it’s clear to see that campaigning has well and truly started. So today, YourLifeChoices reports on the first and most important election issue for older Australians – lifting the base rate of the Age Pension.

We have been reporting on this matter for years now and it seems that, whilst there is outright hysteria at the suggestion of changes to franking credit rebates for the nine per cent of self-funded retirees in self-managed super funds, the one quarter of older Australians living in poverty remains of little concern.

In order to shift the needle on this matter, YourLifeChoices will be contacting the relevant government minister and shadow spokespeople from all major parties for their comments. We think it’s important that our 230,000 members can clearly understand the intentions of all political parties in relation to a suggested increase in the base rate of the pension.

First, let’s get some facts on the table.

Above is an index of 14 OECD nations with which Australia regularly compares its wealth and economic indicators. But you will rarely see this particular index, because we come last out of the top 14 OECD economies, and second last out of the full list of 35 nations. The table measures the percentage of citizens aged 66 and over who live in relative poverty, defined by an income of less that 50 per cent of the median household disposable income for that nation.

You will note the OECD average is 12.5 per cent. Older Australians living in poverty measure 25.7 per cent. This is the second worst ranking, after Korea at 45.7 per cent. Nations with similar economies to Australia – say Canada, United Kingdom or United States – measure 9 per cent, 13.8 per cent and 20.9 per cent respectively.

So, what has gone wrong?

Put in simple terms, since the early 1990s, with the introduction of compulsory superannuation, at a flat percentage, regardless of your salary, this system has worked to reward those on higher salaries. So, if you earn $40,000 in today’s dollars, your superannuation guarantee contribution (SGC) of 9.5 per cent should add $3800 per year to your retirement savings.

However, if you earn $150,000, your SGC will add $14,250 to your retirement nest egg. And because you have more discretionary income, you may take advantage of salary sacrifice or extra contributions adding further to your future retirement income.

So, what seemed like a good idea at the time has contributed to a widening gap between the retirement haves and have-nots.

This gap has widened in Australia compared with the world’s advanced economies, with the exception of Korea, we have the most older adults living in poverty – more than one quarter of our senior population. And it is no surprise that those in the ‘cash-strapped’ retirement tribe (the 15 or so per cent of Age Pension recipients who rent) are doing it toughest. They manage to ‘exist’ on the pension, but often go without essential nutrition, household heating, or much needed preventative healthcare.

The last increase in the Age Pension base rate was under the Rudd government. In April 2008 it awarded $30 a week to single age pensioners and lifted the rate of indexation by 2.7 per cent.

The YourLifeChoices Retirement Affordability Index™ proves that it is high time the base rate was increased again. It is not good enough to assume that older people should just ‘make do’ with a penurious standard of living.

From 20 September 2018, the following pension payment rates apply:

Maximum Age Pension payment rates

Previous

Current

Increase

Single

Base

$826.20

$834.40

$8.20

 

Supplement

$67.30

$67.80

$0.50

 

Energy Supplement

$14.10

$14.10

 

Total

$907.60

$916.30

$8.70

Couple (each)

Base

$622.80

$629.00

$6.20

 

Supplement

$50.70

$51.10

$0.40

 

Energy Supplement

$10.60

$10.60

 

Total

$684.10

$690.70

$6.60

The Pension Supplement is paid as part of certain regular fortnightly income support payments to help eligible recipients meet the costs of daily household and living expenses.

Pension Supplement* basic amount

Previous

Current

Increase

Single

$23.40

$23.60

$0.20

Couple separated

$23.40

$23.60

$0.20

Couple (each)

$19.20

$19.40

$0.20

Pension Supplement # minimum amount

Previous

Current

Increase

Single

$36.10

$36.30

$0.20

Couple separated

$36.10

$36.30

$0.20

Couple (each)

$27.20

$27.40

$0.20

Updated 20 September 2018

As part of its Fix Pension Poverty campaign, the Benevolent Society has noted that older workers contribute $27.4 billion to the economy.

Unattributed contributions include caregiving ($22 billion a year) and volunteerism ($16 billion). To suggest that older people receiving a pension create a drag on our productivity is simply mathematically incorrect.

But by how much should the base rate be increased?
That’s a matter for discussion.

YourLifeChoices will do more work in this area, so stay tuned for our recommendations.

But this is all about our members – and how you are faring.

Are you one of the 26 per cent living in poverty in the ‘lucky’ country?

If so, what are your thoughts on increasing the Age Pension? How much do you believe the base rate should go up? And the rental allowance? Is that sufficient for your needs?

We’d love to hear your thoughts.

Written by Kaye Fallick

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