The government’s changes to pension eligibility will hit those on average incomes hardest, with many losing us much as $100,000 over their entire retirement, new research by Rice Warner shows.
Under the government’s plan, retirees with more than $451,500 in superannuation will receive a lower part pension, with the new cut off point at $823,000 rather than the current $1.15 million.
The research, which was commissioned by Industry Super Australia, found that the changes would result in a 10% overall cut in the retirement income of some Australians.
The number of new retirees affected by the asset test change would more than double by 2055.
Increasingly the impact will fall on those earning average incomes or below
For a couple retiring in 10 years, those on $62,000 a year would stand to lose $4,300 a year each in retirement income.
For a couple 20 years from retirement earning the well-below average weekly sum of $45,000, the negative impact would amount to $1600 a year each.
ISA said by contrast, a couple on $145,000 each would only lose $136 a year each.
“The impacts of these changes are very significant for most of the working population. Executed in isolation they will reduce retirement incomes of middle income earners, not the well-heeled,” said David Whiteley, CEO of Industry Super Australia.
“We seriously doubt this was the government’s intention but these are the consequences when such changes are considered in isolation from the superannuation system.
“Most middle income earners don’t have discretionary income to make extra savings, so this change on its own means they will have to downgrade their retirement plans or work longer.
He said the interaction between superannuation and the age pension needs to be more equitable.
“At a minimum, changes need to include fast-tracking the Super Guarantee and restructuring tax concessions at the higher and lower ends of the income scale.
“This analysis demonstrates the need for a properly considered, long-term review of retirement incomes, not measures driven by the budget cycle.”