Changes to the Pension Asset Test
…An opportunity through the traditional media to get facts in front of people about changes that will occur on 1 January, and one of those areas of change is with respect to the Age Pension.
Very unfortunately, and very sadly the union movement has been robo-calling into homes, deliberately targeting people who will actually benefit and be better off by increased fortnightly pension payments, and telling them, untruthfully, that the opposite is true and that somehow they will lose out.
So this is a very good opportunity to provide Australians, and particularly aged pensioners with the facts about changes that will occur on 1 January, and those facts are that 90 per cent of pensioners will either benefit or be unaffected.
That’s 3.7 million pensioners who will either benefit or be unaffected.
171,000 pensioners, as of 1 January, will find that they have an increase, on average of $30 a fortnight in their pension.
The family home remains exempt from any asset test.
This is all possible, and we are able to benefit 171,000 Australian pensioners with low or modest assets because there are going to be slightly more reasonable limitations around the access to the part pension for those pensioners with very high asset bases.
I’m obviously very happy to take any questions on those changes.
Labor says that 13, 000 veteran pensioners will be impacted. Should they have been exempt?
The only pensioners, who will have any impact, are pensioners, whether they’re veterans pensioners or age pensioners who have comparatively high assets.
So for instance, before these changes the situation has been that you could own a home of unlimited value, literally in the millions of dollars, and as a couple still have $1.178 million in the bank, and still have access to a part pension.
What I would say with respect to Labor is, with respect to these changes to the pension, Labor whole-heartedly, absolutely, 100 per cent, agreed with every change that is occurring tomorrow on 1 January.
Prior to the election they agreed the changes, they took the savings and they spent them on their election promises.
So they were absolutely in fulsome agreement with these changes that are occurring tomorrow.
Industry groups as well question the modelling, saying middle income earners will be impacted, not just the well-off. So have you overdone it on their cuts?
Industry superfunds have made some comments. We’ve had a look at their modelling; we must say that it uses all the wrong assumptions. It’s actually quite incorrect.
But you only need to look at the basic facts around the changes that are occurring tomorrow.
90 per cent of all pension recipients are better off or unaffected – 90 per cent.
That leaves the much smaller group of 10 per cent, and that 10 per cent represents pension recipients with comparatively higher asset bases.
And I’d say again, that inside that 10 per cent sits people, who previous to New Year’s Day, were able to own a home, a multi-million dollar home, have more than a million dollars in the bank or in super, and still get a part pension.
We think that it’s reasonable that savings be made there so that pensioners with more modest assets, and with more limited financial capabilities receive an uplift, and 171,000 Australian pensioners will get more pension each fortnight as of tomorrow because of these reforms.
What about claims that the changes will create a disincentive to save?
Well I must say, those claims don’t bear out any rational economic modelling and they don’t go along with what, we would consider to be, common sense.
The reason why someone, in a couple or a single, would accumulate superannuation, and we hope that more people will accumulate superannuation, is that that is the way in which they are able to maintain a decent standard of living in their retirement.
But what we, as a government say, is that there must be some reasonable draw down on that superannuation. The pension is not meant to be a supplement that prevents you from drawing down on superannuation.
The long term incentive to save absolutely exists, continues to exist. But what we want to do is look after the group who have the low and modest asset bases.
The University of Melbourne did a study and they suggested that the changes to the tapering rate would in fact mean that people would have an incentive to dispose of their assets. So how is their modelling wrong?
Their modelling is wrong because they don’t take into account the fact that there are rules around disposal of gifts that prevent that from occurring.
What also needs to be noted is that the taper rate that has been changed is being changed back to where it was in 2007.
So John Howard made the taper rate more generous, and we’re returning to the pre John Howard era, because that decision was made at a time when the budget was in massive surplus and there were billions of dollars in the bank.
But these changes allow us to move back towards surplus, but they also allow us, as a government, to look after in a better fashion, the 171,000 pensioners who have more modest means, and have more modest assets and who have a limited financial capability to look after themselves. And they’re the people who have definitely benefited tomorrow on 1 January.
From a housing point of view, does the government have any concerns that this creates a disincentive for older people to downsize, and therefore potentially affect the mobility in the housing market.
That is all about the family home. The family home has always been exempt from the assets test. There is no change there. The family home remains exempt from the assets test.
So we don’t see that that changes the fundamental incentive structures inside downsizing or upsizing for anyone involved.
In the long term, could we end up with more people on the pension, because those that aren’t already on it change their lifestyles now to ensure they are eligible?
That doesn’t bear out on looking at the facts around the accumulation of superannuation.
More and more Australians, and this is a very positive thing, are accumulating larger and larger amounts of superannuation.
But the point about superannuation is that that is an asset that it is reasonably expected you will draw down on in retirement. It’s not an asset which is designed to handover to your kids.