Asset-rich retirees have been receiving around $500 million in benefits per year.
A recent study by the National Centre of Social and Economic Modelling (NATSEM) has shown that retirees who are considered ‘asset rich’ have been receiving government handouts worth around $500 million per year, prompting calls for an overhaul of Australia’s retirement system.
In fact, over a quarter of a million Australian households with a net worth of more than $3 million are receiving welfare payments to the tune of $800 million per year. The study also shows that wealthy families have access to more than $6 billion worth of taxpayer-funded benefits per year, such as education and public healthcare. Households with a net worth of more than $2 million also pick up around $1.4 billion in cash welfare each year.
Cash benefits among working age families with a combined income of $150,000 totalled $4.3 billion per annum – mostly in the form of childcare payments. Added to that figure, was a further $38 billion in non-cash payments (public education and healthcare) that were also handed out to families.
The findings have highlighted the disturbing ease with which wealthy retirees can qualify for the Age Pension, and have renewed arguments that the family home, or ‘principle residence’, should be included in the income asset test in order to help redress this discrepancy.
Minister for Social Services, Scott Morrison, has opened talks with various seniors’ groups to discuss plans for including the principle residence in future asset tests, as too many people who are ‘asset rich’ are receiving pensions – money that would be better directed towards those with little or no assets. But there is a general consensus that the process cannot be rushed, and the debate could continue for some time before a resolution is reached.
To find out more, read the article titled Not fair: welfare for the rich at The Australian.
At $42 billion per year and rising, the Age Pension is the one of the government’s largest and fastest growing expenses. With the budget currently estimated to be in a $40–$56 billion deficit (depending on the source), the government needs to find savings from public spending in order to get back in the black.
So far it has targeted unemployment benefits, education, a GP co-payment and family tax benefits as sources of revenue and savings to cover the debt. A raft of legislation changes, which include Age Pension indexation and eligibility age are waiting to be passed – such changes will hurt those on a meagre limited income, who can least afford to lose even a few dollars each week. Yet according to the NATSEM findings, around $500 million per year is being handed out to multi-millionaire retirees (with over $3 million in assets). A further $1.4 billion per year in benefits is being provided to those with a net worth of $2 million. These groups would seem ripe for the picking in order to refill the steadily emptying government coffers.
An upcoming intergenerational report is set to spell out the exponential increase in spending on items such as the Age Pension. So, in order to balance the books, the government faces the tough task of implementing policies that may adversely affect a large portion of constituents – who may also be conservative voters. Still, it may need to be done, and rather than taking more away from those who need it most, the government needs to take aim at those who can realistically fund their own lifestyles without the benefit of taxpayer-funded handouts.
Imagine the process of deciding how to change the asset test for the Age Pension, to make it fairer for all. It will be a monolithic task with many factors to take into consideration. What of the retirees who bought their family home in 1970, and who have seen the value of their home increase over the years? And those who were told that the pension asset test wouldn’t change and were advised to put their life savings into property? Is it fair for them to have to sell their home in order to live out their years as a self-funded retiree? Sure, there are many who may be taking advantage of this pension situation, but there are also many who could be undeservedly put at a disadvantage by changes to the asset test.
However, if it will help to ensure a sustainable pension system for future generations, the government needs to weigh the needs of the many against appeasing the wealthy.
What do you think? Do you feel that changes to the asset test are necessary? Do you think it is right to include the family home in the asset test? What suggestions can you make in order to create an equitable solution for all retirees?