New report shows urgent need for pension reform

A new international report has endorsed the Australian Government’s pension reforms, confirming that the high rate of poverty among older Australians is a direct result of inadequate payments.

The report also endorses the Government’s economic security strategy.

The Pensions at a Glance report released overnight by the Organisation for Economic Co-operation and Development (OECD) shows that the poverty rate for older Australians is double the OECD average.

The report’s analysis is based on pension figures from 2006, during the time of the previous Government.

Australia has the fourth highest poverty rate for people aged over 65 in the OECD. Only Ireland, Korea and Mexico have higher rates of old-age poverty.

Along with Ireland and Switzerland, Australia’s old-age poverty rates are double those of the rest of the population.

Poverty rates for singles are worse than for couples.

As part of the Government’s Secure and Sustainable Pension Reform, 3.3 million age pensioners, disability pensioners, carers, wife pensioners and veteran income support recipients are benefiting from increases in their payments.

From 20 September, single pensioners on the full rate will receive an increase of $32.49 a week which brings the single rate up to two thirds of the combined couple rate. Pensioner couples combined will receive $10.14 a week extra.

The reforms we have made to the pension system will improve adequacy, make it simpler and more responsive to pensioners’ needs and secure the sustainability of the pension system as the Australian population ages.

The reforms to Australia’s pension system are essential and overdue after 12 years of inaction by the previous Government.

The reforms have been endorsed in the OECD report which states: “the OECD welcomes the Government’s increases in the age pension to address this problem”.

It says pension reform which balances adequacy with fiscal sustainability is essential. “It remains necessary… that governments take steps to ensure that public policies deliver a retirement-income system for the long term that is secure, adequate, financially sustainable and economically efficient.”

The report also backs the Government’s economic security strategy claiming that, through the economic stimulus payments, “Pension systems might play a part in helping recovery from the crisis”.

It says the payments made to pensioners in December 2008 are “worth most to low-income pensioners, which should help reduce old-age poverty”.

Four out of every five Australians over the age of 65 benefited from the December stimulus payments.

Legislation to enact the Government’s Secure and Sustainable Pension Reforms has passed the House of Representatives. Passage by the Senate this week will ensure the smooth implementation of the increases on 20 September 2009.