Opposition leader Bill Shorten may have announced that the Labor Party would not support proposed pension changes but a deal with the Greens means that the changes to the asset thresholds and pension taper rate announced in the Federal Budget will pass through Parliament.
In order to secure the Greens’ support for the measures, which are forecast to deliver $2.4 billion in savings over four years, the government had to agree to extend the consultation period for the tax white paper. The agreement came despite the Greens initially demanding a review of retirement incomes in return for agreement on the pension measures.
“Support for the single largest savings measure in this year’s budget, following passage of the government’s cornerstone small business measures, demonstrates the Abbott Government is successfully getting on with the job of implementing our ‘have a go’ budget,” Minister for Social Services Scott Morrison said.
“As a result of these changes it is estimated more than 170,000 pensioners with low and modest levels of assets will have their pension increased by around $30 a fortnight from January 2017, when these changes take effect.
“Those who lose access to the part-pension as a result of the increase in the taper rate, to the settings that were in place prior to 2007, will be guaranteed access to the Commonwealth Seniors Health Card.”
The changes are an alternative to the more contentious measures announced in last year’s Federal Budget that failed to gather any support and pass through the Senate. However, the abolition of the Seniors Supplement, paid to self-funded retirees who qualify for a Commonwealth Seniors Health Card (CSHC), will go ahead, with the Labor Party supporting the move. The payment of $894.40 for single CSHC holders is likely to cease after the June 2015 quarterly payment.
The Opposition has also committed its support for the capping at 10 per cent the level of income from defined benefit superannuation that can be excluded from the pension income test. This measure is likely to take effect from 1 January 2016.
Read more at TheAge.com.au
Changes to the asset threshold may well mean that part age pensioners lose their pension, but it’s the change to the taper rate that is likely to have the greatest effect for those entering retirement in the next 10 to 15 years. Many pre-retirees have based their retirement planning on the taper rate being $1.50 for every $1000 of assets over the threshold, so the increase to $3 will have a substantial affect on expected pension payment rates. The resulting shortfall will be difficult to address over this limited timescale.
Also, if you believe what the government is telling us, it should be good news across the board, with the increased thresholds before the Age Pension is affected resulting in around 50,000 part age pensioners being entitled to a full Age Pension. However, the Combined Pensioners & Superannuants Association disputes this claim. This is largely due to those part age pensioners with few assets having their pension payments limited under the income test and not the asset test. As the income thresholds are not being increased, many of the 50,000 pensioners will see no increase in their pension at all.
The impact on retirement incomes as a result of the changes to the pension asset thresholds and taper rate only serves to highlight that the initial call by the Greens was correct – a comprehensive review of retirement incomes is indeed an urgent necessity. An extension of the consultation period on the tax white paper is unlikely to help the growing number of pre-retirees and retirees facing a retirement income shortfall.
Do you think the changes to the pension asset thresholds and taper rate are a step in the right direction? Do you expect to gain or lose from such changes? Is a review of retirement incomes necessary?