Hundreds, potentially thousands, of Australian retirees will be waking on Wednesday to dreaded letters confirming their pensions will be cut.
A spokesman for the Department of Human Services confirmed to The New Daily that the letters were sent this week, with the first batch expected to arrive on December 7.
Approximately 313,500 retirees, or about 8 per cent of all pensioners, will receive the correspondence, telling them their pension will be cut in part or full in the new year.
The letters are tailored to the individual, with specific information on the impact to their payments.
An earlier note, mailed to about one million Australians in October, warned the recipients of potential cuts.
Bob Parry, a semi-retired accountant who received the first letter, called on the government to reverse the “disastrous” changes.
“It’s never too late to stop a mistake. Even in January they could pull the plug on this because when they look at it properly they’ll find it’s a disastrous thing they’re doing,” Mr Parry told The New Daily.
He has been fighting the changes since the Abbott government pushed them through, with support from the Greens and Nick Xenophon.
Mr Parry calculated, using his accountancy experience, that retiree couples will be incentivised to split, or to frivolously spend large amounts of their savings, in order to fall below the tougher assets test.
From January 1, the asset threshold for the age pension will be made more generous, but the penalty for exceeding the threshold will increase.
This will boost the payments of about 4 per cent of pensioners, while reducing or cutting entirely the payments of about 8 per cent, according to the government.
Mr Parry hopes to convince crossbench senators to reverse the changes.
Unions have joined the fight, with Dave Oliver, secretary of the Australian Council of Trade Unions, attacking the cuts as another example of the Liberal-National government trying to improve the budget by “squeezing” workers.
“The pensioners targeted by these cuts have worked hard their whole lives and are entitled to a comfortable retirement,” Mr Oliver said in a statement.
“They rely on the pension to make ends meet each week and now the government is pulling the rug out from under them.”
Under the changes, all retirees will face a less onerous assets test to qualify for the pension (from which their home is exempt).
The more generous threshold will be: $375,000 for homeowner couples; $250,000 for homeowner singles; $575,000 for non-homeowner couples; and $450,000 for single non-homeowners.
But the penalty for exceeding the threshold will increase from $1.50 to $3 for every $1000 in assets over the test. This explains why some part pensioners will lose some or all of their payments.
The intention of the government’s cuts was to reduce the impact to the budget while giving more to poorer pensioners.
Independent research has verified this: poorer retirees will be better off. About 166,000 Australians (4 per cent of pensioners) will get a small increase, according to the government.
But there are fears that far too many retirees in ‘Middle Australia’ will be penalised in order to improve the lot of the poor.
This was confirmed by modelling by Professor Carsten Murawski at the University of Melbourne. He found that 51 per cent of retirees would retire ‘comfortably’ (defined as more than $58,128 per annum in 2014 dollars) under the new rules, down from 62 per cent under the old rules.
Labor’s shadow social services minister Jenny Macklin criticised the government for taking “so long” to inform affected pensioners.
“The Turnbull government should have done more to explain these changes to pensioners,” Ms Macklin told The New Daily.
“It’s not good enough to send off a letter a few weeks before the changes kick in.”
Those who lose the pension in full will also lose their Concession Card, but this will be replaced by a non-means-tested Low Income Health Care Card or Commonwealth Seniors Card.
For more information, listen to a podcast produced by the Department of Human Services: