This week the Federal government is again taking to the Senate a bill that contains its proposed changes to the age pension after redrafting earlier blocked bills.

The ALP Opposition has already waved through the freezing of the assets test for three years from 2017 in the House of Representatives and will do the same in the Senate. Compromises may emerge from the cross-bench on freezing the income test, slashing the deeming rate thresholds, and raising the eligibility age to 70.

The Prime Minister and his tense backbenchers must be concerned about the potential for political fallout because Mr Abbott took pre-emptive action this month and sent a personal letter to every age pensioner assuring them that what he was planning to do with the pension was OK.

Interestingly, in this letter the Prime Minister avoided mentioning the big-ticket item that pensioners are deeply concerned about – changes to pension indexation.

Pensions currently go up every six months by the higher of the increase in average weekly earnings, the CPI, or the Pensioner and Beneficiary Cost of Living Index or PBCLI. This ensures the pension keeps up with the real cost of living.

The government’s plans would remove both average weekly earnings and the PBCLI in 2017 and only index by CPI. Occasionally that would be all right because the CPI is the higher. But generally this is not the case. In fact only twice in the pastfive years has the CPI been marginally higher.

The Parliamentary Budget Office reports that by 2024-25 the proposed changes will reduce the total value of age pensions that year by $6.9 billion. That’s about $2000 a year less for a single pension, more than $3000 less for a couple in today’s dollars.

Why is the government taking such drastic steps and targeting pensioners – many of them Coalition supporters?

According to Treasurer Joe Hockey, it is all about avoiding the budget crisis precipitated by the advent of the ageing population.

Indeed the population is ageing. The population aged 65 plus will increase by 85 per cent between 2011 and 2031 and the percentage aged 65-plus will increase from 13.8 in 2011 to 18.7 in 2031.  That’s more people potentially on the pension and fewer  workers paying income tax to help fund it.

But the sky isn’t falling. We have known about our changing demographics for a long time and have built a pension system which is repeatedly named internationally as one of the most modest and sustainable in the western world. Our pension system costs government only two-thirds of the average for the OECD.

Yet we do have a superannuation system that provides high-income earners and wealthy retirees with very generous tax concessions – in some cases more than the equivalent of a full age pension.

When it comes to retirement, there are big winners and even bigger losers and it is all in the interplay of taxation, pensions and superannuation policies that creates this great inequity.

While the debate around pension changes rages on, the Financial Services Council has calculated that working Australians will have $128 billion less in their superannuation savings by 2025 following the decision to delay the 12 per cent superannuation guarantee.

If the government is so concerned about the sustainability of the pension in the long term why would they even consider a move to reduce most workers superannuation savings?

What is happening is that decisions are being made about pensions, superannuation and tax in a piecemeal way, in isolation, and without consideration for the flow-on effect they will have in other areas.

Instead, we urgently need the government to agree to an independent and comprehensive review of retirement income policy in Australia.

It’s time we got in the same room all the best minds who have looked at the ins and outs of current polices, and also talked with older people and other stakeholders, to discuss the best way forward, taking in the whole picture – pensions, superannuation, taxation and mature age employment issues.

Let’s take the current bills off the table and take a proper look at the best policies that will address the challenges and opportunities our ageing population. Policies that are equitable, co-ordinated and sustainable and don’t just entrench disadvantage for millions of older Australians.

Ian Yates is chief executive of  COTA Australia