Debate is raging about the proposed changes to pension indexation and how this will affect those on the Age Pension. Yet still there is some confusion as to whether this legislation, if passed, will actually mean you receive a lower Age Pension payment. So, to help clarify what is being proposed, below is exactly what was announced in the 2014/15 Federal Budget.
Asset and income thresholds
The proposal is to suspend, for three years from 1 July 2017, the indexation of the asset and income levels, which are applied to Age Pension eligibility and payment rates assessment. So, as assets and income increase over time, there is a very real chance that they will exceed the non-indexed thresholds and result in a reduction in Age Pension payments.
Lowering of deeming thresholds
From 1 July 2017 it is proposed that the threshold for the lower deeming rate is reduced to $30,000 for singles and $50,000 for couples. This will result in investments being assessed as returning more income and therefore may result in a reduction in Age Pension payments.
Changes to Age Pension payment rates indexation
Possibly the change that will affect Age Pension payments the greatest, it is proposed that rates are indexed only to CPI, rather than the current method of benchmarking to the Male Total Average Weekly Earnings (MTAWE) and including the Pensioner and Beneficiary Cost Index (PBLCI) in the indexation formula. It is estimated by the Australian Council of Social Services (ACOSS) that if the MTAWE and PBLCI had not been applied to pension indexation over the previous 10 years, then those on the Age Pension would be receiving $80 per week less than they are now.
Increase the Age Pension eligibility age
In a move, which could see Australians having to work longer, it is proposed that the age at which a person become eligible for the Age Pension will increase from 67 in 2023 to 70 by 2035.
You can find more details of the proposed changes by visiting APH.gov.au
Opinion: Now is your time to act
Just when you may have thought that all hope of stopping the changes to the Age Pension was lost and that pensioners could be worse off by $80 per week, an unexpected ally has stepped forward from the Liberal Party backbench. But it is unlikely that this will be enough to convince Tony Abbott that the proposed changes need to be reconsidered. So if you rely on, or will rely on, an Age Pension to fund your years in retirement, now is the time to consider if it will be sufficient to meet your needs and, if not, add your voice to those who have the ear of the Prime Minister.
As Drew blogged on Tuesday, a group of Liberal Party backbenchers have been lobbying the Prime Minister to reconsider the proposed changes to the Age Pension which are due to be gradually rolled out from 1 July 2017. Prompted by this news, GetUp has furthered our Protect the Pension campaign to enable you to contact your local Coalition MP and give him or her a powerful story from their constituency to share in the Coalition party room.
The power of this opportunity should not be underestimated. As we saw with the GP co-payment, which has now been scrapped and the Paid Parental Leave Scheme, which has been dropped in favour of a families package, the government will act when it is under no illusion that the voting public demand it does so.
Conveying your point of view is simple. All you have to do is visit the GetUp website to have your say. If you’re unsure whether or not a you are represented by a Coalition MP, type your postcode into the correct field, hit ‘enter’ and your MP’s name will be displayed. Then all you have to do is tell them your views on why the changes to legislation, which may result in a reduction in your Age Pension, should, or should not, be scrapped.