Changes to indexation could see Disability Support Pension (DSP) rates cut.
Changes to indexation could see Disability Support Pension (DSP) rates cut and more frequent medical reviews may mean that the DSP is removed altogether.
If the recommendation of the Commission of Audit is adopted, the DSP will no longer be benchmarked against the Male Total Average Weekly Earnings (MTAWE) and will only be indexed to the rise in the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI), whichever is greater. This will bring the DSP into line with other work-related support payments such as the Newstart Allowance.
According to Deloitte Access Economics, this would save the Government $2.4 billion over the next four years. Benchmarking of the DSP to the MTAWE has resulted in six of the last 10 pension increases. Where the CPI rose by 17 per cent between 2005 and 2011, the MTAWE rose by 23 per cent.
It has also been mooted that a large number of people receiving the DSP will need to be re-examined by an independent doctor. Those who were assessed by their family doctors prior to the Labor Government tightening the rules in 2011 would be re-examined by Department of Human Services medical officers. Further changes could also see tiered payments depending on the type of disability and ability to undertake part-time work.
Disability Discrimination Commissioner Graeme Innes said: "To effectively move the test back a few years, it just seems a cruel way of penalising people who’ve been in receipt of a benefit. Introducing a quarterly or six-monthly check is just adding more complexity both for the Centrelink system and for people with disabilities."
Welfare Minister Kevin Andrews has spent some time in New Zealand recently and is said to favour some of the features from its welfare system, which "invests" in people before they become entrenched on welfare. He has told Patrick McClure, who is overseeing the Government’s review of the welfare system, to have a close look at how New Zealand manages its system.
Read more about DSP indexation at TheAustralian.com.au.
Read more about changes to eligibility for DSP at SMH.com.au.
Proposed changes to indexation of the Disability Support Pension may only be the tip of the iceberg, with all payments coming under increased Government scrutiny.
When those receiving the DSP turn 65, they are contacted by Centrelink and asked if they wish to continue receiving the payment or switch to the Age Pension. Given that payment rates and eligibility rules don’t differ greatly, many choose to stay with the DSP. However, if there were a difference in how both pensions are indexed, then many more would probably make the switch. This would undoubtedly put pressure on the Government to also change the indexation of the Age Pension.
Benchmarking the Age Pension to the Male Total Average Weekly Earnings (MTAWE) has meant that the rate of a single Age Pension has increased by $2000 more over the last four years than if it were indexed only to the Consumer Price Index (CPI) or Pensioner and Beneficiary Living Cost Index (PBLCI). If you extrapolate this over the next four years, assuming growth is steady, then those on the DSP would be receiving $2000 less than those on the Age Pension. Which would you choose? Given that the current single Age Pension and DSP, including supplements, is some $1371 less than the ASFA retirement standard for a modest lifestyle, a further reduction of $2000 would have a devastating effect on pensioners’ budgets.
Since the Howard Government introduced the benchmarking of pensions to a percentage of male earnings in 1996 it has resulted in an increase of $7000 in the annual rate. This means that without this benchmarking, the annual Age Pension, including supplements, would be $14,912 or $573 per fortnight. How could anyone survive on this meagre amount?
Other revenue measures being considered by the Abbott Government could see fuel prices rise under an increase to the fuel levy and the payment of a supplement to see a doctor, putting further pressure on already tight pensioner budgets. If pension indexation is hit as well, those struggling may simply find it all too much to take.
Could you imagine living on $7000 less per year? Do you think it’s reasonable to change the way the DSP is indexed, without also changing the indexation formula for the Age Pension?
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