Scott Morrison reveals details of pension changes that will leave about 170,000 part-pensioners better off, but scrap or reduce payments to others

About 170,000 part-pensioners will receive an increase in their fortnightly benefit, while 236,000 wealthier recipients will be paid less and 91,300 will lose access to their payments in an overhaul in next week’s budget.

The social services minister, Scott Morrison, revealed the number of winners and losers from changes to the part-pension asset test and taper rates on Thursday.

For weeks, the government has signalled it was planning to scrap its unpopular proposal to slow the pace of increases to pensions, and replace it with changes to eligibility to part-pensions for wealthier retirees who have substantial assets.

The winners from the government’s package are part-pensioners with assets of lower value, while those at the higher end will either receive a smaller share of the part-pension or lose eligibility altogether. Taper rates refer to the pace at which a benefit reduces as a person’s income and assets increase. The overhaul will save $2.5bn over the four-year budget cycle.

“This is about ensuring the pension has fairer access and a more sustainable future for the pension,” Morrison told the ABC on Thursday.

“That is being done by increasing the amount of assets someone can have at the lower level, which will mean 170,000 pensioners will have a higher pension of around $30 a fortnight, and that includes 50,000 pensioners who will go onto a full pension.

“At the other end, though, we currently have the system where you can own your family home as a couple and have more than $1m in assets and still draw down on a part-pension. That will cease in January 2017 when these come into effect, so there will be no changes to the pension in this term of parliament.

“That will mean that those over $823,000 [in assets] who are couples and own their own home they will not get a part pension any more and there are coinciding changes [in other categories]. ”
The government was expected to reveal further details later on Thursday. But it is not planning to add the value of the family home to the assets test.

Morrison said the package was designed to assist those in greatest need. He said the government was effectively reversing a measure put in place by the Howard government in 2007 that made the taper rates more generous. People at the higher level of the assets test were self-funded retirees, he said.

The prime minister, Tony Abbott, said the Howard government’s “very generous changes” were made “in the unique circumstances of those days”.

Abbott said the changes to be announced in the forthcoming budget were “exactly what we need to make the pension sustainable in the long term”.

“This idea that you can be a liquid assets millionaire and still be a part-pensioner I think it problematic,” he told 3AW on Thursday.

“Yes, people with relatively few assets will get more. People with relatively more assets will get less.”

And in a reference to the political potency of the campaign against last year’s budget, Abbott said: “My determination is to ensure that this budget is fair … I don’t want anyone to say that this is an unfair budget.”

Morrison said the $2.5bn in savings over the budget’s four-year cycle were greater than the savings that would have come from the pension indexation change.

But he conceded that “over the longer term … it doesn’t hit the same mark” in terms of budget savings.

“This is a compromise, this is something we’ve been working on now for some time with crossbenchers and stakeholders, trying to come up with a fairer, more sustainable pension for the future,” he said.

“We believe we’ve done that. That doesn’t mean they’re all winners and there are no losers – that’s not the case. With any difficult change you’ve got to make these hard decisions and this is what the government is doing.”

Morrison’s reference to the measure starting in 2017, after the next election, appeared to be an attempt to head off suggestions the move breached Tony Abbott’s promise in 2013 to make no changes to pensions.

Labor signalled earlier this week that it would continue to campaign against the prime minister’s proposed pension changes on the basis that they would represent a broken promise.

Source:theguardian.com.au

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