What to do about the Aged Pension?

Originally posted by Shayne Beckham ↑

The Federal government’s fiscal position is on a negative trajectory over coming years without austere budget measures, even if commentators differ on how soon or how hard it must be tackled. The Federal Government wants to raise the retirement age, when the evidence is that age discrimination is entrenched. Further, the Prime Minister announced on Monday he wants to link aged pension increases to the Consumer Price Index (CPI) from 2017.1 This strategy of hitting all aged pensioners equally raises the question of whether the Federal Government is taking the wrong tack in order to save money from this slice of the welfare sector.

More significant savings would come from lowering the asset test for the aged pension and/or including the family home, which is currently exempt from the assets test. Retirees aged 65 and over who have assets worth $2 million or more still receive $500 million in welfare benefits each year; the biggest component of these assets is the home they live in.2 For example, why should a couple on part pensions be allowed to own their home of whatever value and a $1,145,500 investment property, without losing a cent in benefits? The usual defence is aged pensioners may be asset-rich and cash-poor, but a reverse mortgage would not require them to move out of their home. Politics is all that stands in the way, as Social Services Minister, Scott Morrison, rules out including the family home.3

Effectively such middle-class welfare is being used as a means of intergenerational wealth transfer. In contrast, a balanced view should view the welfare system as a safety net for those who have no other means of support. This means restricting entitlement, so Australia can afford to maintain the real value of aged pension payments relative to average weekly earnings for those who really need them.

Footnotes

Daniel Hurst, ‘Coalition Should Put Pensioners First, Says Liberal Backbencher’, 9 March 2015, The Guardian Australia (Online) <http://www.theguardian.com/australi...ut-pensioners-first-says-liberal-backbencher>.

James Bennett, ‘Age Pensions Will Not Include Family Homes as Part of Assets Test, Scott Morrison Confirms’ 17 February 2015, ABC News (Online) <http://www.abc.net.au/news/2015-02-...-home-in-assets-test-for-age-pension/6126090>.

Ibid.

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Hi Shayne

Regardless of raising the pension age or not the truth is there are no jobs for these people
How can workers in a physical job still do hard labor when their 65 years old
To join the pensions to the CPI means that the method of calculating the CPI has to made relevant to actual figures not the rubbish that is advertised now. Every time you go to buy something there is a 20 to 50 % increase over the last few months in the price. The published CPI is a joke
The only way that a government can create a job is to employ people in the public service. The public service already has 50% more people than they need
There does need to be a lowering of the assets in the means test, any money given the anyone needs to be means tested and yes I know a multimillionaire who gets pension benefits
The range of pensions must be reduced, but the aged pension must not be made worse than it is.