Many age pensioners will now have received letters in the post confirming the changes to their Age Pension. For some, the news will be good, but for others, 2017 will kick off with less income being received.
So, who will benefit? This has caused much confusion, mainly due to the way in which it was announced. When the changes were first outlined, there was an increase of $30 mentioned and many age pensioners thought they would be receiving that amount as an increase, but no, this is not the case. While the increase will vary, with $30 being the maximum increase per fortnight, it actually refers to those 120,000 on a part Age Pension who will receive a higher payment and the 50,000 part age pensioners who will now receive a full Age Pension.
And who will be adversely affected? Unfortunately, for around 91,000 age pensioners their payments will be stopped and a further 235,000 will have their pension payments reduced.
Many people are surprised that such changes have the support of the Opposition, the Greens and the Australian Council of Social Services (ACOSS), but what has been lost in the narrative is that these changes were actually seen as more acceptable than those initially announced back in 2014 when Tony Abbott was Prime Minister and Joe Hockey was treasurer.
Joe Hockey proposed the following changes in the May 2014 Budget:
- the qualifying age for the Age Pension would rise from 67, as it will be in 2023, to 70 by the year 2035
- pension payments would be indexed only in line with the consumer price index (CPI)
- the income and asset test free areas would be frozen for a period of three years
- the deeming thresholds for financial investments would be reset (reduced)
The outcry that followed these changes was vociferous and the Coalition Government soon realised that they were not going to pass the Senate, nor be well received by the public.
Between the fallout from the 2014 Federal Budget and the announcement in May 2015 of the now legislated changes, many possible pension scenarios were mooted, one being the inclusion of the family home in the asset test.
Ultimately, it was decided that amending the asset thresholds and doubling the associated taper rate would be better received.
Those who are losing their Age Pension or will see it reduced, may beg to differ.
If there was ever any doubt how older Australians feel about the Age Pension, YourLifeChoices members have let us know.
On Thursday we ran a quick poll that asked how you saw the Age Pension: an entitlement, a safety net or a handout. From the 2346 response we received over four days, 86.57 per cent, or 2031 YourLifeChoices members agreed that it was an entitlement.
Source: YourLifeChoices December 2016
So why then, if this is the general consensus, is there such a rush to ‘punish’ those who have for years, paid taxes to be able to receive this entitlement?
For the last seven years we have known that the qualifying age for Age Pension would increase to 67 eventually. Yet pensioners have had only 18 months to adjust to the fact that they may lose some or all of their Age Pension.
This doesn’t just affect those who are currently receiving the Age Pension, but also those who have planned to retire in the next few years and have based their income calculations on the previous thresholds.
If eight years notice prior to the 1 July 2017 commencement of a gradual change to the increase in Age Pension eligibility age is possible, could the same consideration not have been given to those whose retirement plans will be hardest hit?
By all means look to balance a budget that we’re told is out of control (today’s MYEFO will confirm this), but do it in a way that people aren’t immediately penalised.
Those who will lose their part Age Pension or have their Age Pensions reduced are by no means millionaires – they’re just hard-working Australians who were fortunate enough to save a little over their working life. It would have been fairer to have excluded current pensioners from these changes, applying them gradually over the next five or 10 years. This would not only have given pre-retirees the chance to actually do something to offset the change, but it would also have given people several more years of superannuation contributions to help buffer the loss.
While these changes may be perceived by politicians as the lesser of two evils, they do very little to help the retirement income of those Australians already struggling to make ends meet. And may further discourage many more Australians from saving for retirement, as they will expect last-minute changes to the rules.
What do you think? Should the changes go ahead? Would introducing them more gradually have made them easier to absorb? Or is it better just to get the change over and done with?