Pension changes are unfair

    Jenny Macklin
    The Australian
    April 28, 2015


The age pension is about $20,000 a year; hardly a lavish income. Yet if you believe Tony Abbott and Scott Morrison’s rhetoric you’d think pensioners are bankrupting Australia. This is simply untrue.   :(

Let’s look at the facts. Even the Treasurer’s Intergenerational Report shows the age pension, exactly as it is without changes, will account for just 3.6 per cent of gross domestic product by 2054-55. Whichever way you look at it, Australia spends a relatively small proportion of our GDP on the pension.

Public spending on old-age benefits (age pension and veterans pensions) across the OECD already averages 7.8 per cent of GDP. Public spending on these payments is highest — greater than 10 per cent of GDP — in Austria, France, Germany, Italy and Japan. The US and Britain devote 6.8 per cent and 6.2 per cent of GDP respectively to spending on pensions. In New Zealand public spending on these payments is 4.7 per cent of GDP.

When Morrison says the age pension is not sustainable, he’s wrong — it is. The Allianz Pension Sustainability Index last year found Australia has the most sustainable pension system in the world. Allianz, one of the world’s largest asset management companies, measures the pressure on governments across the globe to reform their pension system.

But Allianz isn’t alone in this view. The Melbourne Mercer Global Pension Index found Australia’s retirement income support system is the second best in the world. The Council on the Ageing has said that “taken on its own the age pension system is sustainable”. Indeed the OECD’s annual report card last year found the payout from the age pension in Australia ranks as one of the most modest in the OECD. This combined with a well targeted pension “augurs well for future fiscal sustainability”.

One of the reasons for Australia’s relatively low expenditure on pensions is because of the decision of the Hawke government in the 1980s to introduce an assets test to the age pension, a move opposed by the Liberal opposition at the time. A well-targeted pension system is essential to ensuring the continued sustainability of Australia’s pension system.

Despite all this evidence, the Abbott government now wants to cut expenditure on the age pension by $23 billion by 2024-25 by indexing the pension to the consumer price index only.

The Australian Council of Social Service estimates this will result in an $80 a week cut to pensions across the next decade. It will break a decades-old bipartisan commitment to link pension indexation to wages growth.   :(

If Abbott gets his way, the pension will drop from 28 per cent of average weekly earnings today to just 16 per cent by 2055. Changing the indexation system is the least equitable way to address the sustainability of our retirement income system. As COTA’s chief executive Ian Yates says: “Full pensioners would be living well below the poverty line.” Does anyone seriously believe pushing pensioners into ­poverty and hardship is good public policy?   :(

Of course ensuring the sustainability of our retirement income system is important, but it needs to be done in a fair and equitable way. Labor knows this; that’s why we introduced compulsory superannuation. Our universal super system will continue to take pressure off the age pension. The maturing of our super system will result in a decline in the proportion of people of age pension age claiming the full rate age pension. By 2047, the proportion of Australians receiving a full pension will fall from about 50 per cent to 30 per cent.

And Labor is continuing to make decisions to ensure the integrity of the pension and superannuation system is maintained. The recent superannuation proposals Labor has announced are all about putting fairness back into the system — they are fair and they’re good for the budget.

It is fashionable in conservative quarters to question what modern Labor stands for. Labor is guided by a belief that all Australians deserve the dignity of a decent standard of living in retirement; a belief that older Australians should not be forced to live in poverty during their final years. That’s exactly why Labor opposes the government’s cuts to pension indexation. They are simply unfair.

Totally missing the point, but coming from you that's hardly surprising!!!

Armchair_Politician wrote on Apr 28^th, 2015 at 8:28am:

Totally missing the point, but coming from you that's hardly surprising!!!

its funny how every man and his dog claims the aging population is GROWING at a rapid rate.... that is everyone accept Jenny... we are also living LONGER Jenny...

Of course they're unfair.

That's the whole point.

If the Labor Governments that Jenny Macklin was part of didn't blow the budget x 6 then change wouldn't be necessary.... :(

By 2054-2055 a properly managed super system that does not empty the coffers to pay outrageous amounts to people who would never need a pension should have virtually run the pension bill down to nothing......

Anyone in this short-sighted government ever heard of strategic planning?

By now they've got all the answers to what's wrong with the current super picture and all they have to do is fix it so that it does the job it was intended to do - cut out the need for pensions - meaning there is no place for high earners in subsidies for super.

If you can't live and put some aside on $250k a year you shouldn't be in your job.

As before - super subsidies are not intended to give you extra cash to invest in another investment property or spend a nice holiday cruising the Danube.... they are there to cut out your NEED in the future for a pension - if you finances are sufficient that you will not NEED a pension in future - you have no NEED for subsidies.

Swagman wrote on Apr 28^th, 2015 at 9:10am:

If the Labor Governments that Jenny Macklin was part of didn't blow the budget x 6 then change wouldn't be necessary.... :(

Had the Liberals not blocked superannuation increases for 20 years there would be no problem to fix.

cods wrote on Apr 28^th, 2015 at 8:37am:

Armchair_Politician wrote on Apr 28th, 2015 at 8:28am: Totally missing the point, but coming from you that's hardly surprising!!! its funny how every man and his dog claims the aging population is GROWING at a rapid rate.... that is everyone accept Jenny... we are also living LONGER Jenny...

Totally missing the point


Do either of you know what point was missed ?

I would think that to be able to correctly point out that the pension was very low cost on international standards and rated as one of the most affordable in the world is very much the point.

Dnarever wrote on Apr 28^th, 2015 at 10:48am:

Swagman wrote on Apr 28th, 2015 at 9:10am: If the Labor Governments that Jenny Macklin was part of didn't blow the budget x 6 then change wouldn't be necessary.... :( Had the Liberals not blocked superannuation increases for 20 years there would be no problem to fix.

You mean taxes on business.

The pension is paid at too high a rate. many pensioners own their own homes and you need less money as you get older as you basicly are content to sit and watch telly or do a spot of gardening.

The younger person on newstart , would rarely own their own home, needs a car to look for work, should be able to engage in some hobbies and yet gets paid a good deal LESS and doesn't enjoy 1/2 price rates, power , rego and the other sweeteners the grey power selfish gits have got through chucking a tantrum everytime they needed to be bribed , to vote for some sleazy pollie.

really , the pensioners of Australia should hang their heads in shame for the selfish way they carry on and should be willing to share the pie more fairly

For as long as our successive governments are happy to play Santa Claus with sending millions of taxpayer dollars offshore annually to countries that are Third World cesspits of corruption, criminal activity, militarism, and privileged elitism that sees the rest of their populations living off the city dumps ~ there is absolutely no proper reason for our politicians to start telling the aged pensioners that we are an unacceptable drain on the economy.

aquascoot wrote on Apr 28^th, 2015 at 11:09am:

The pension is paid at too high a rate. many pensioners own their own homes and you need less money as you get older as you basicly are content to sit and watch telly or do a spot of gardening. The younger person on newstart , would rarely own their own home, needs a car to look for work, should be able to engage in some hobbies and yet gets paid a good deal LESS and doesn't enjoy 1/2 price rates, power , rego and the other sweeteners the grey power selfish gits have got through chucking a tantrum everytime they needed to be bribed , to vote for some sleazy pollie. really , the pensioners of Australia should hang their heads in shame for the selfish way they carry on and should be willing to share the pie more fairly

;D ;D ;D

That's a whole lot of horse-poo aquastallion! ~ I'm living off the smell of an oily rag. Most of my aging friends-and-neighbours are stuck at home mummifying in front of 'Judge Judy' and 'The Bold and the Beautiful' precisely because they don't have enough pennies in the kitty to venture out and do something more inspirational.

The only aging people I know with money to spare are the Greeks and the Italians who tapped into the infamous Mediterranean Back Syndrome (MBS) compensation rort many years ago to pay off their wo.. er ... ethnic mansions while retiring young on the Disability Support Pension.

Right this very moment there are hundreds, if not thousands of Italians and Greeks 'back home' living active lives while receiving the DSP from the Australian government.

Lord Herbert wrote on Apr 28^th, 2015 at 2:26pm:

aquascoot wrote on Apr 28th, 2015 at 11:09am: The pension is paid at too high a rate. many pensioners own their own homes and you need less money as you get older as you basicly are content to sit and watch telly or do a spot of gardening. The younger person on newstart , would rarely own their own home, needs a car to look for work, should be able to engage in some hobbies and yet gets paid a good deal LESS and doesn't enjoy 1/2 price rates, power , rego and the other sweeteners the grey power selfish gits have got through chucking a tantrum everytime they needed to be bribed , to vote for some sleazy pollie. really , the pensioners of Australia should hang their heads in shame for the selfish way they carry on and should be willing to share the pie more fairly ;D ;D ;D That's a whole lot of horse-poo aquastallion! ~ I'm living off the smell of an oily rag. Most of my aging friends-and-neighbours are stuck at home mummifying in front of 'Judge Judy' and 'The Bold and the Beautiful' precisely because they don't have enough pennies in the kitty to venture out and do something more inspirational. The only aging people I know with money to spare are the Greeks and the Italians who tapped into the infamous Mediterranean Back Syndrome (MBS) compensation rort many years ago to pay off their wo.. er ... ethnic mansions while retiring young on the Disability Support Pension. Right this very moment there are hundreds, if not thousands of Italians and Greeks 'back home' living active lives while receiving the DSP from the Australian government.

more inspirational ?
like play the pokies?
a man cant get into the TAB these days through the hordes of pensioners living mummified existences in front of a pokie machine ;)

aquascoot wrote on Apr 28^th, 2015 at 11:09am:

The pension is paid at too high a rate. many pensioners own their own homes and you need less money as you get older as you basicly are content to sit and watch telly or do a spot of gardening. The younger person on newstart , would rarely own their own home, needs a car to look for work, should be able to engage in some hobbies and yet gets paid a good deal LESS and doesn't enjoy 1/2 price rates, power , rego and the other sweeteners the grey power selfish gits have got through chucking a tantrum everytime they needed to be bribed , to vote for some sleazy pollie. really , the pensioners of Australia should hang their heads in shame for the selfish way they carry on and should be willing to share the pie more fairly

You must be joking when you state you need less money when retired, yet health costs, and maintenance of home is a lot dearer for an older person, because many things a young person can do themselves, the oldies have to pay for I
I have posted, what is below before; would you care to read it, and then comment on it.


In 2007 the then Prime Minister John Howard introduced the tax-free super for the over sixties, if the super income comes from a so-called taxed fund.
As a result :

This is how the retirees are treated in Australia.
Retiree: 1)
Worked for 45 years and paid taxes, but did not accumulate enough assets to be completely independent of the age-pension. For every dollar of extra income for him and his wife above $6,500, the couple loses $0.50 of age pension, and if their income exceeds $45,000 per annum, the couple will pay tax of $0.315 in the dollar including medicare levy, leaving them with an income of $0.185 from every dollar extra income. For the defined benefit income a 10% tax-offset applies if paid from an Australian super fund, but not if the income comes from an overseas fund.
Retiree 2)
Has accumulated assets of $1.5million,mostly with huge tax concessions, and the assets are in a so-called taxed Self Managed Super Fund. To be very conservative, the assets are in a term deposit earning 7.0% income of $122,500 per annum and even if the retiree is single, he/she will not pay a cent of tax.
Now if the assets are in fully franked shares, like banks, and return $100,000 worth of franked dividends, he/she will again pay no tax on the dividend, and the government will send him/her a cheque of $30,000 for the franking credits.
Should the assets of these retirees fall below a certain level, they will be entitled to the age pension as anyone else, therefore why does the government provides the rich retirees with such huge tax concessions, while punishing the retirees at the lower income scale with the punitive means-test of the age pension?
Retiree 3)
Is an ex-politician or highly paid public servant, in receipt of a defined benefit pension of $100,000, on which he/she will have to pay tax, but he/she gets a 10% tax offset, which equals $10,000 after reaching retirement age, but before retiring, the public servant can establish a SMSF and contribute into it extra with tax concessions if the $25,000 total for under fifty and $50,000, if over fifty is not exceeded and in addition he/she can contribute $150,000 from after tax income, and the earnings from the SMSF will only attract 15% tax, and when the person reaches the age of 60 even the income will be completely tax-free for the SMSF.
Retiree’s 2) are well represented by the media and the super industry, as well as the Unions, and retiree’s 3) are represented by the government, and ironically by the leadership of various retiree Associations, like ACPSRO and its affiliated Associations,Acoss,COTA, but who represents retiree’s 1) the part- pensioners who are being robbed of a decent standard of living in retirement by the means-test of the age pension.
What is the fairest solution; scrap the mean test of the age pension and scrap all tax concessions for super.
Will the government change anything, as long as the above mentioned Associations support the government; never.
.
Is there any other country which treats its citizens in such a discriminatory manner?
I would like to refer you to two recent articles;
1st) AFR ,Dec 8-9. 2012 by Brian Toohey, “Compulsory super makes little sense.
2nd)AFR 13.Feb 2013 by Alison Kahler, “Don’t put super over the nationa l good.
3rd) AFR 21.March “Call to scale back super tax breaks” by Sally Patten.
Recently there was a lot written about changes in super, which  now seems to have disappeared, because the super industry and the Unions seem to be secure that the government will not make any drastic changes to the tax concessions for super.
Last year, a record number of Australians travelled to other countries, a drain on the Australian economy, and many of the travellers were probably self-funded retirees, who benefit enormously from the tax concessions for super.