Is the Age Pension under pressure?

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Financial experts have weighed in on the future of the Age Pension, with most agreeing that the government may have a tough time funding the Age Pension of the future, but, by and large, it seems to be safe.

A rapidly ageing population coupled with a diminishing workforce means Australia’s Age Pension system is under pressure, says Anthony Keane.

Australian Bureau of Statistics data shows that around 80 per cent of retirees received a full or part age pension in 2016-17, and only 21 per cent were fully self-funded.

But the number of self-funded retirees is rising along with the maturity of the superannuation system.

The Actuaries Institute estimates the cost of funding the Age Pension in its current form should actually reduce as a percentage of the economy, from around 2.7 per cent of GDP in 2017 to around 2.5 per cent of GDP in 2038.

“This reflects recent tightening of means testing, later retirement ages and further growth in superannuation balances,” says the institute.

This could mean that future governments will have the ability to manipulate the pension system to ensure money goes to those who really need it.

However, in what would be bad news for retirees, the first ‘tweak’ to the pension system would most likely come in the form of putting the family home on the block.

The Government already tightened up the assets test in 2017, and if this trend were to continue, it indicates that the family home may not be safe from the assets test in future.

“A lot of people became self-funded retirees, not because they wanted to but because the government reduced the benefit,” says Planning for Prosperity financial adviser Bob Budreika.

“People will have to be more self-reliant. I believe that ultimately the government will assess a person’s home as an asset as they do for aged care. They will nibble away at the benefits – I think they will be forced to.

“It does become ridiculous having someone with a substantial asset and relying on a source of income from the government, so the kids end up with the house tax-free,” he added.

Mr Budreika also suggested that there could be stricter super access rules, such as a mandatory setting aside of a portion of retirement savings to provide a steady retirement income stream.

There have also been suggestions that a portion of super savings could be set aside to pay for any health or aged care needs in retirement, further reducing the reliance of older Australians on the public purse.

Do you think the family home will be safe from the assets test for the foreseeable future? What do you think of having portions of your savings taken from you to pay for aged care and healthcare? Would you be happy to have your super doled out to you to ensure a steady retirement income stream, or would you rather have total control over your retirement savings?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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164 Comments

Total Comments: 164
  1. 0
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    Yes, foe sure. They’d probably like to see us living in hovels.

    • 0
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      Yep. I guess noone voted LNP on here. They were always going to come after retires super, home and yes here’s the topper, franking credits. Good luck folks.

    • 0
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      Cue Old geezer to say that the Pension should be a loan against future liquidation of assets, just like drawing for incapacity on Defence Force Superannuation is a ‘loan’ against the future payout to the recipient (grrrrrrrr)……

      I recommend two visits to the guillotine for each supporter of that kind of theft, and then mandatory remedial psychology if symptoms persist…..

      Time to tear these political and PS swine some new ones….

    • 0
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      What, an election just dusted off and already talk of bringing in franking credit reform, capital gains tax reform and now bring the family home into the assets tests? I never.
      Whilst the government nobody wanted to have is back in I find it strange to read about all of the above. Is the government softening us up for what is coming? I know….this lot will never bring in the above. And the pope is not a catholic either.

    • 0
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      Alexii, Unfortunately, that may happen while corporate machines continue to run the Government and Australians continue to buy shares in them.

      No Australian politician would ever give up their pension and perks like the then 83-year-old ex-President of Uruguay José Mujica did back in 2015 when he retired.

      Our rich politicians are too busy serving those that provide them with financial kickbacks instead of the taxpayer.

      https://www.bbc.com/news/world-latin-america-45195188

    • 0
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      Cue MICK to come in with some pearls of wisdom, thought so!

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      This is just a ridiculous article – meant to stir up Retirees by throwing controversial (mostly unacceptable) suggestions from a couple of non-entities (suffering Relevance Deprivation) up in the air? This is not from the Govt.

      However, the focus of such ideas must have a deliberate bad intent, as the Govt is planning a Retirement Incomes Review very soon. Maybe the Business interests, such as Financial companies, behind these non-experts wanting to push ideas where they can gain more business.

    • 0
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      Yes , so-called economist experts go x the easy way out.
      How come they always find money x asylum seekers, migrants, dole bludgers, foreign aid and politicians high salaries and pensions?

  2. 0
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    We are easy targets.

  3. 0
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    After the recent federal election scare campaign about the retiree tax ( franking credits ) this will never happen over the next one to two election cycles unless the government of the day wants to be voted out. it would be hypocritical of the Liberal government to introduce any more changes affecting retired Australians.

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      Bit late after what they’ve done already – it seems the retiree community is very forgiving…. not me though. I’m magnanimous in victory ONLY.

  4. 0
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    Savings, what bloody savings? Good luck trying to get any money from me or my wife, we have almost zero savings now. We will not be moving to an old folks home or whatever, our somewhat newish home is ok with us, minimal gardening & upkeep, so no need to go anywhere, at least until we are forced to by circumstances beyond our control. As for Super savings, good luck trying to get any of mine, about $1000 is all I have left now!

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      Just down-sized to suit disability and now renovating to suit disability for my ex (when do I get to retire?) – but up-priced due to position (near heated pool and facilities)and market. Does that mean we’re bludgers and taking money from the government’s coffers for nothing?.. I get carer allowance, but it should be an extra full pension due to the real costs etc.

      Are any of those factors included in calculation of value of a house? Special steps to suit older people, special carpet over hard tiles, new bathroom (again), security so she feels safe at night …. all these add value – so that means we need to pay the Guv for them?

      Tell ’em from me to get stuffed….

    • 0
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      So sick of hearing ‘down size’…I couldn’t down size much more unless it was to a caravan, or perhaps tent. There are enough homeless people now.

    • 0
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      you may be surprised to learn the downsize message is not personally directed to you in2sunset. Nobody is suggesting you exit the much loved hovel for a caravan or tent, tho it remains a choice in principal. It is a very real option however for those that bought homes in the burbs in the 80s and 90s that now find themselves with assets in the seven figures. This provides a real opportunity to downsize to a place with less garden, reduced maintenance etc and have enough left in the tin to be comfortable. Yes, the kids inheritance takes a dent but they will get over it.

  5. 0
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    Of course they want to take control of our money. What about their money? Nn rules and regulations for them. Bloody mongrels

    • 0
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      Their money is our money

    • 0
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      Totally agree with you Trevine. They keep looking towards the general pensioners instead of taking a long hard look at themselves. Look how many politicians jumped ship prior to the election because they wanted to get the higher rate of pension. Abbott and Turnbull alone will be pulling in about $210k per annum each and they can continue to work and collect the Pension at the same time. Turnbull is already in a top job. It’s so wrong. Not to mention all the added perks, free high class travel, paid medical….the list is endless.

    • 0
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      Yep it makes me sick too at their unbelievably generous pensions, rorts etc. Yet they have the gall to go after pensioners and those on welfare. It’s time they looked into their own endless pensions and perks before they rob us any more.

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      We need a Royal Commission on politicians past and present. The whole pension and perks thing was a corrupt process.

    • 0
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      Most retirees are ok with the government and conservative ideology, at least while the alternative is progressive ideology or a ragtag of wannabes.

      A royal commission is unnecessary and will achieve nothing until there is consensus among the pollies and encouragement from the public. it is not a top of mind issue.

      The sooner a government promises to reset on pollie remuneration the better but there is little chance of that happening any time soon. How good would it be if pollies received a one time adjustment and then going forward identical superannuation and benefits arrangements as other civil servants?

  6. 0
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    “There have also been suggestions that a portion of super savings could be set aside to pay for any health or aged care needs in retirement, further reducing the reliance of older Australians on the public purse.”
    What? So the sick and needy HAVE to spend their hard-earned (it comes from OUR wages) retirement dollars while the healthy dont?
    And THIS: ” and if this trend were to continue, it indicates that the family home may not be safe from the assets test in future.”
    From the heroes who said they wouldn’t touch pensions and retirement savings! Remember, only a few weeks ago? And they had the gall to accuse Labor of wanting to have a RETIREMENT TAX?
    It seems a lot of older voters were hoodwinked by the Ad Man.

    • 0
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      Hmmm .. “take from the super … rely on the public purse… take from the super … rely on the public purse…” … it’s a tough one, Eddie… thanks for giving me the one out of two chance …….. Lock in B) Eddie – rely on the public purse…

      Stupid non-thinking as usual from government, its agencies and its paid advisors – taking from super means less money in hand and thus further reliance on social security – but I’ll bet they’ve got that one sewn up well in advance. One thing you can guarantee is that no step is taken without their having worked out every move, like a chess game, well in advance – that’s where Shorten fell short with his franked dividends game play… instead of being well in front of the game, he appeared to make up changes on the fly….

      I say hang ten a week until the rest get the message.

  7. 0
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    There IS a way through this.
    Firstly, there WILL be enough money to provide a pension for those in need. Any talk of the contrary is just LNP scare tactics.
    The compulsory Super scheme was designed to cope and so far is coping. It will only get better as workers who have had the benefit of it ALL their working lives come on stream. I have only recently retired, and I started work at 17. But had 13 years work before the compulsory super scheme came into effect. And I wont need a pension, (assuming no unfortunate events, continued ill health of me of my family). I have only ever earned the average wage OR LESS (mostly less!). We have our own home (only one since we married).
    No extravagant lifestyle, only a few holidays. It can be done – for the average person/couple. For the less fortunate, there is the pension.

    • 0
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      That’s exactly how it should be working, OTB – governments screeching that the budget is in disaster mode due to toe ‘costs’ of pension just shows how utterly incompetent and out of touch – and what liars they are in reality – governments in this nation are.

      Plenty of money for every pet project that comes along – plenty of new ‘social science’ commission and star chambers to be created to employ party favourites etc – never enough to pay the bills that fall due as anticipated and paid for in advance.

      As before the entire gamut of government spending needs to be fully reviewed and the dead wood cast out. No more ‘commissions’ and such to suit women’s whines, same for ethnics, same for Aborigines, same for gays and weirdoes – we’re declaring equality right here and now…. now get on with life and stop leaning, you lazy bludgers.

  8. 0
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    Well, I’m safe. There is a nice bridge in my area and I am saving to buy a nice tent. The creek near the bridge will be my loo and a few card boxes will build a nice mattress. A couple of supermarket nearby will supply a couple of trolleys to keep things in order. The Library is not faraway so I will have all the entertainment that I need (though I think I will have to bath before going inside).
    The Salvos will provide some dodge soup once a while and some old clothes for the winter. I live in a lucky country after all. Who needs more?…

    Bring it on Scomo!

    • 0
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      lol! Well said AussieTuca – it could well get to that soon! We have approx. 130,000 homeless already in Australia.

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      Worked with a bloke years ago who was often late for work in winter because he said he had to chip the ice off the creek before he could have a wash. Not a worry if you’re retired though, Aussie Tucca.

  9. 0
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    If the information in this article is correct, and that the cost of funding retirement is going to reduce from 2.7%, down to 2.5%, then the Government should not need to introduce any significant changes. Especially including our residential home as an asset. Should they decide to use our home as an asset, the dollar value as an asset will diminish, and we will have no assets when it comes time to enter into retirement living. Who is going to pay for our nursing care then? Oh guess what? They now want to dig into our savings account to pay for our aged care. There goes the holidays and entertainment money! It appears retirement is no longer something to look forward to, following our extended years in the workforce and paying high taxes. Does this really pass the PUB-TEST?

  10. 0
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    So with a focus on these types of negative incentives why would anyone try to build up their super. I have always strived to save and invest in my super so that when I retired I would be able to use that money to buy what I wanted or to do the things I have been foregoing for 30 years. My advice to my children will be to spend like today will be your last and tomorrow will take care of itself.

    • 0
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      Good advice for the kids, Joe. Certainly would not work any more as diligently as I did from the 60s onwards. Scare tactics will always be with us like the Mediscare one from a few years ago. As long as Super is used for wealth generation for future family members it will not be enough to give a living return for the people concerned.
      Inheritance taxes would solve a lot of problems, the current aged people would be cared for by getting the full pension – only the heirs of the estate would get less and they should be able to make their own income. I know that is not a popular solution but Super should be for the contributors not for the next generation.

    • 0
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      Cowboy Jim, mediscare? Heaps has been done to Medicare to water it down. It is not announced but it has happened. GPs need the payment they get unfrozen. Many have to pay for tests like scans which used to be covered. I have witnessed people not making appointments because they cannot afford the tests they need. LNP don’t broadcast they just do. Every month it is a struggle to get our meds because they have been removed which never used to happen. It goes on and on.

    • 0
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      So true Paddington – the LNP/IPA hate Medicare and have wanted to get rid of it since Fraser’s time. They are killing it slowly and surely.

    • 0
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      I thoroughly agree with you AveragJoe. I am single, have worked bloody hard to own my little house outright. My car is 19 years old. Just gone on the pension with minimal super – facing a retaining wall bill of nearly $12,000, which will have to come out of that super.
      But I look at my bludger of a sister – lives in a 3BR govt house (no kids at home any more), has been on DSP for over 25 years (lung damage due to smoking). Takes a cruise every year with her friends. I haven’t been on a holiday for 6 years – and that was only interstate.
      I really think I have done it all wrong. Why anyone would work hard to buy their home, and put money into super – I really don’t know why. I tell younger ones I know – Live it up, spend it, because you will be bloody penalised in older age for trying to look after yourself.
      I FIRMLY believe that in future years the govt will control people’s super, etc and dole it out. My only consolation is that I will be long gone and won’t need to care.

    • 0
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      Trouble with that and with things like dictating that pensions be a loan etc, Cowboy, is that only the fatter cats will be able to preserve their ‘superannuation’ and assets and such with the Usual Suspect chicaneries, and thus only the fatter cats will be able to pass on a meaningful inheritance – and the gap between wealth and poverty will grow and grow. That is a lot like the increasing cost of a tertiary education – soon only the fatter cats will be able to afford it and thus we will revert to the situation I was in back in the 1960’s – slated for medical school, but being on the wrong side of the family meant I would not get any help at all, and it was simply not viable without a solid family support network at the home I did not have. Some on the ‘right’ side of the family went on to uni – I had to wait until it was free…..

      As the gentleman I know you to be, you could not countenance such things as robbing the poor again?

    • 0
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      &Trebor – the inheritance tax would take the fat cats down a peg or two but would not force existing people out of their houses; it only would apply to the heirs who would get less than they expected and so would help the one who do not inherit anything.
      Talking about the problem of forcing people to downsize because of asset increases should the family home be included in the test. Yes – I meant the pension to be a loan against the estate in preference of cancelling the pensions of people in houses they have always lived in and thus forcing them to downsize against their wishes.

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