Senator Jacqui Lambie has attacked the government’s series of cuts to the age pension, and hinted she is “exploring her options and consulting with Tasmanians” on whether to fight looming changes to the pension eligibility test.
“The Liberal government’s attempts to, firstly, push out the qualifying age for the pension and, secondly, change asset testing and the adverse defined benefit scheme are a kick in the guts for a group of people who have worked hard and paid their taxes all their lives,” she told The New Daily exclusively.
Research by the Parliamentary Library, commissioned by Senator Lambie, found that 10 bills have passed through Parliament since July 2013 amounting to almost $4.5 billion in pension cuts.
“Surely there are better ways to repair the budget and balance the books than by taking money from the generation who worked hard to make Australia great?”
The change causing the most consternation is an amended asset eligibility test, which will come into force in the new year. The last hope for its opponents is either a change of heart by the government, or a groundswell of political support for reform in the upper house.
No action is likely before Parliament returns in 2017, by which time roughly 300,000 retirees will have lost some or all of their payments.
In recent days, thousands of pensioners were notified by letters from Centrelink that their payments would be reduced from January 1, 2017 as a result of a more onerous tapering rate.
Industry Super Australia, which represents many of the nation’s largest industry funds, warned the cuts would lower the living standards of many retirees, including single women.
“These changes will heighten existing weaknesses and disproportionately hit low- to middle-income retirees well into the future,” ISA chief executive David Whiteley said.
The new policy assumes retirees can earn over 7.8 per cent each year on the top portion of their savings, which the ISA chief said was “unfeasible”.
Currently, MoneySmart, a division of corporate regulator ASIC, assumes a 5 per cent return on a moderate investment portfolio, 4.2 per cent on a conservative portfolio, and 2.9 per cent on cash deposits.
(This assumes retirees live off the returns on their lifetime savings, and leave the majority of the capital untouched for their heirs).
From January 1, the asset threshold will be made more generous: $375,000 for homeowner couples (up by $78,500); $250,000 for homeowner singles (up $41,000); $575,000 for non-homeowner couples (up $127,000); and $450,000 for single non-homeowners (up $89,500).
‘Assets’ are defined as such things as financial investments, household contents, personal effects, cars, boats, caravans and investment properties. The family home is excluded.
The concern is that the more onerous penalty for exceeding the test will squeeze many middle-income retirees.
The full age pension, with supplements, is currently $877 a fortnight for a single person and $661 for each member of a couple.
Under the changes, every $1000 in assets over the applicable threshold will deduct $3 per fortnight from the payment. Formerly, the penalty was $1.50.
Because of this, the upper limit for any pension payment is now $542,500 in assets for a single homeowner (down from $793,750); $816,000 for a homeowner couple (down from $1,178,500); $742,500 for a single non-homeowner (down from $945,250) and $1,016,000 for a non-homeowner couple (down from ($1,178,500).
According to the government, this will result in about 4 per cent of pensioners getting an increase, about 8 per cent losing some or all of their payment, and a budget saving of $2.4 billion over the next four years.
Modelling by the University of Melbourne found that many middle-income retirees would be the worst hit.
By the time Parliament returns in the new year, affected retirees will have already had their pensions reduced – or ended entirely.
Criticism of the changes is not universal. Their intention, according to the government, was to make the pension system fairer by boosting payments for the poor.
The changes have been praised by the Greens and the Australian Council of Social Services.
Read a copy of the Centrelink letter below: