Tens of thousands of wealthier retirees will lose access to the age pension under changes targeting what Prime Minister Tony Abbott has described as “liquid assets millionaires”.
Social Services Minister Scott Morrison has formally dumped a controversial plan to link pension increases to inflation rather than average male weekly earnings and will instead move to limit eligibility for the pension by changing the assets test.
The Government is targeting wealthier retirees by reducing the threshold at which the part pension cuts out.
At the moment, couples can own $1.15 million in assets on top of their family home to qualify for the part pension.
That threshold will now be reduced to $823,000 for couples meaning about 91,000 people will no longer qualify for the benefit, while another 235,000 will have their pension reduced.
But the bulk of retirees will either see no changes to their pensions, or will receive a small boost.
The maximum value of assets a person can own in order to receive the full pension, will be increased from $202,000 to $250,000 for single home owners and from $286,500 to $375,000 for couples who own their own home.
Mr Morrison said those changes would see more than 170,000 pensioners receive an extra $30 a fortnight.
He emphasised that the family home would not be included in the assets test and “never will” under a Coalition government.
“The Government is seeking to ensure fairer access to a more sustainable pension. These are the only changes the Government is putting forward for the pension,” he said.
“By reducing eligibility to the pension for those with more assets, they will become fully self-funded retirees.
“This means, though, we must retain the incentives through the tax system for superannuation.
“The Government does not support Labor’s proposal to tax superannuants more on the income they have generated for their retirement.”
He said the changes would come into effect from January 2017 and would save the budget $2.4 billion over four years.
Changes will make pension system ‘more sustainable’
Prime Minister Tony Abbott said the announcement would reverse the changes to the assets test made under the Howard government.
“This idea that you can be a liquid assets millionaire and still be a part pensioner I think is problematic, so we will be tackling that. But at the same time, at the other end of the asset scale, we want to make it more generous,” he told Macquarie Radio.
Anyone adversely affected by the changes will be guaranteed access to the Commonwealth Health Seniors Card or Health Care Card, which provides the same concessional access to pharmaceuticals as given to those on the pension.
The Government is also moving to close a loophole that currently allows nearly 48,000 wealthier people on defined-benefits superannuation schemes to “effectively fly under the radar” on the income test for the pension.
When asked why it had taken so long for the Government to abandon its planned changes to the pension indexation, Mr Abbott said the Coalition had listened, learned and acted.
“That’s what sensible Governments do,” he said.
Mr Abbott said the new plan protected the vulnerable and helped the vast majority of pensioners.
“Ninety per cent of people on a pension or on a pension-related benefit will be no worse off or significantly better off as a result of these changes,” he said.
Opposition wary of latest proposals
Opposition Leader Bill Shorten said while he was willing to consider the latest plan, he signalled he was not in favour of them.
“If the Government wants to do something about helping the budget bottom line, take on large foreign multinationals, pick on someone your own size,” he said.
“Don’t pick on part pensioners and those who are less well off in our community.
“Let’s see the detail, the fine detail, but this is a government who when they talk pensions, I get very worried for pensioners.”
The Greens’ spokeswoman for ageing, Rachel Siewert, said the changes appeared to be a step in the right direction, but were quite complex and needed consideration.
“It is likely that we would refer these changes to a Senate inquiry so that we can get an idea of what those changes are to make sure there is no unintended consequences,” she said.
Meanwhile, the Council on the Ageing has called for an independent review of the changes.
Council spokesman Ian Yates welcomed the Government’s decision to dump plans to lower the pension indexation.
But he said the moves to strip wealthier retirees of their benefits needed further scrutiny.
“The Government is saying that there’s a community expectation that people with a certain level of assets, couples with over $800,000, will be using that as part of their retirement income,” he said.
“That’s something we think should go through the scrutiny of an independent review so that we can try and get some bipartisanship.”