People on modest incomes could be thousands of dollars a year worse off because of pension changes in this year’s budget, retiree advocates have warned.
A couple aged 45-50 on average earnings could lose as much as $6000 a year as a result of the changes, Industry Super Australia (ISA) has estimated.
Under the new asset test, retiree couples with more than $823,000 in assets (excluding the family home) can no longer claim the pension – down from a $1.15 million threshold.
“Changes to the pension assets test will require most Australians to save more in super or work longer,” said ISA chief executive David Whiteley in a statement.
Treasurer Joe Hockey’s budget released on Tuesday reaped its “biggest savings” from older Australians, a spokesman for National Seniors agreed.
“The biggest savings in the budget … are from senior Australians,” National Seniors chief executive Michael O’Neill said on Wednesday.
“They’re going to have to draw down their assets,” Mr O’Neill told Sky News.
“I think we’re going to have an emerging issue here.”
The asset test will apply a taper rate of $3 – up from $1.50 – which means for every $1000 in assets over the threshold the payment will reduce by $3 a fortnight, the Australian Financial Review has reported.
Treasurer Joe Hockey said “there will be no new taxes on superannuation under this government,” in his budget speech.
But the ISA’s initial modelling suggests heavy impacts for retirees with a retirement balance of $375,000, who would have their yearly super and pension income reduced to $43,500, below comfortable retirement standard rates of $58,500, the report said.
Average income earners aged 45-50 will be hit hardest when they retire in 2035, the report said.
To solve the retirement shortfall, the superannuation guarantee of 9.5 per cent should be lifted to at least 12 per cent, according to the ISA.
But even that increase could still “prove insufficient” for older retirees, the ISA claimed.