You told us: Why the pension is a right we earned, not a handout

Read and share what you had to say on why your assets are a no-go area for pensions means testing.
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Pensioners say they were promised by Ben Chifley that their taxes were a form of retirement saving.

Is it fair to expect Age Pension payments while refusing to draw on your assets in retirement so you can leave a nest egg for the kids?

It’s a tough question for the Starts at 60 community, that drew many thoughtful responses when we asked you.

“I certainly don’t see my assets as my children’s rightful bequest and luckily, neither do they,” Jay Walker wrote on Natter at 60, while Robin Henry said: “Our intention is not to go without so the kids can reap a heap of cash.”

“We have worked and paid taxes for most of our lives, paid for our ‘assets’ so why be penalised for it,” Anne Parkinson commented on Starts at 60’s Facebook page. “Surely what you have paid for should be yours.”

“You worked hard and saved and you probably went without to do that,” Christine Williams agreed. “So why should you be refused the pension when others just spend their money and didn’t save.”

But Kerrie An Shee wrote: “If you have assets you should spend them before accessing welfare including the Old Age Pension. OAP is welfare and should only be given to those who have no other means of support.”

The big question

Professor Kevin Davis kicked off the debate this week with a policy paper for the Australian Centre for Financial Studies about the new Age Pension taper test introduced on January 1.

Davis’ paper argued that people who used their assets to make up for the lower pension payments they received under the new rules would feel little pain from the changes.

But he also posed a larger philosophical question.

“Is the age pension an entitlement which enables people to obtain government support in retirement despite having private assets which they do not draw down but instead leave as a bequest for their heirs?” the ACFS’s research director asked in his paper.

“Or is it a safety net, which supplements draw down of private savings to enable some adequate level of retirement consumption?”

In an interview with the Australian Financial Review about his paper, he suggested the government should put the family home into the broader asset test for the Age Pension and increase the amount of assets a pensioner could hold and still receive payments.

 “One of the big problems with our whole approach is that a lot of retirees with part pensions have got $600,000 of assets, as well as the family home, and that doesn’t count towards the assets test,” he told the AFR. 

A big change

On January 1, the government changed the value of assets a person could hold and receive either a full or part-pension, cutting the value of assets homeowners could hold in additional to their main dwelling and still draw a part Age Pension.

The rules also hiked the taper rate for the assets test, which meant that pension payments were cut by $3 a fortnight for every $1,000 of assets a pensioner held above a certain amount, so their pension was now ‘tapered’ more quickly than it was at the old rate of $1.50. More information on the rules is available from the Department of Human Services.

According to AMP, about 300,000 part-pensioners had their entitlements cut under the new rules and 100,000 lost their payments entirely. But more than 50,000 people who weren’t previously eligible for a full Age Pension became eligible under the new rules.

A big response

So we asked the Starts at 60 community: Is it okay to keep your assets as a bequest and claim the Age Pension? Has the original purpose of the Age Pension been altered so that it’s now seen as a universal right rather than a safety net for the poorest workers? Are you happy to use the assets accrued over a lifetime’s work to fund or part-fund your retirement?

More than 140 people (and counting) told us what they thought.

Many pointed out that Australians had been encouraged to see the Age Pension as an entitlement as far back as the 1940s, when then-treasurer Ben Chifley cut the lowest tax threshold for and said the extra money raised would be put into a National Welfare Fund to cover social benefits such as pensions.  The fund was later melded with the government’s Consolidated Revenue Fund.

“People’s assets have got nothing to do with the pension. If they had a full working life and paid the 7.5 percent Old Aged Pension tax/levy, then it’s their money they are getting paid. It’s not the tax payers’ or the government’s money,” Warwick Lynch wrote on Facebook.

“Let’s just forget this falsehood that nothing was put aside from our taxes during our working life,” Lee-Ellen Crispin said. “Chifley’s government set up a 7.5 percent tax component specifically as a pension fund – successive governments have since raised this and pulled it into general consolidated revenue so we are no longer aware of it on our tax returns.”

“The government took the money set aside many years ago to fund the Age Pension and put it into general revenue in order to balance their books … They robbed Peter to pay Paul and now are panicking because so many are eligible and claiming their entitled pension,” Marianne Cox said.

Ron Saunders noted that the original intention was, in fact, that today’s Age Pension was a universal right rather than a safety net, recalling that prime minister Robert Menzies had said  “the stigma of charity should be removed from the age pension. It should be an entitlement earned by the person’s personal contribution to the fund.”

Many readers were furious that Age Pensions were being trimmed, while politicians’ pensions remained largely untouched. The Parliamentary Contributory Superannuation Scheme, which is now only available to politicians elected before 2004, allows members to retire on pensions worth hundreds of thousands of dollars.

“I have so far worked for 54 years, am almost 70 and very proud of that,” Karen Hellmech commented on Facebook. “Let the government take money from the pollies, see how they like it. Half of them haven’t worked 10 years and look what they end up with.”

Val Kirby said: “They can take our assets when they stop paying themselves when they are thrown out of government and have to repay all the lurks and perks they have had on the way. Also, they should repay their pensions.”

“If the pollies can keep their assets, buy homes with their living away allowances and still keep their pensions, what’s the difference between the Aussie that has worked all their lives for their retirement?” Willow Breeze added, while Fay Dixon said: “The politicians have no shame when they collect their pension which we ‘donate’ part of our taxes to.”

Some readers said that if a pensioner’s only substantial asset was a modest family home, it was fair that it should remain exempt from the asset test and be seen as a possible bequest.

Vicki Wallace commented: “As long as you only have one house and not millions in the bank, yes. I want to leave my house to my children and I only have a small super fund but I would expect to get a full pension!”.

“House assets YES, large amounts of money assets NO. Some people are extremely rich and still claiming the pension and free medical – this should be stopped,” June Ann Fox added.

Some community members said Australia should take some tips from countries that separate tax payments made by workers for the purpose of pension-saving from other tax payments.

Elda Mulrine Quinton said: “We should do it the way it’s done in the UK and Scandinavia. Why should all our taxes go into general revenue? In the UK they don’t pay any more than us in the combination of tax and National Insurance.”

Others, however, were in favour of aiming for total self-sufficiency.

“I guess it depends on how many [assets] you have,” Jo Bain commented on Facebook. “If they are sufficient to generate a decent income, why claim a pension? Time was we were proud to be able to support ourselves if we were able and would have considered those who ‘work the system’ to be pretty contemptible.”

Nell Elizabeth Hamilton-Schulz agreed: “It’s for those who need it most. We should not prop up people who can look after themselves,” while Jacqueline Mordaunt said: “I don’t think you should be able to keep your assets (apart from your home) and claim the pension.”

“The best advice anyone can give is to set yourself up so you don’t need a pension,” Robin Henry summed up on Natter at 60. “Relying on others, including governments, is never a sound option.”

Do you have thoughts on this big issue for retirees and people planning their retirement? Are you confident the Age Pension won’t be further reduced or more heavily means tested? Does Australia need to rethink its attitude to the Age Pension for future generations?

 

 

  1. Sue Peart  

    I’m not sure how others have prepared for their retirement but for us the goal was to always save to pay off our own home and never rent if at possible, we achieved that. I started my working life at 15 married at 22. I have never had a days unemployment. It would have been so demeaning in those days to get unemployment benefits. Always paid private health insurance from day one, raised a family on about $7 per fortnight child endowment in 1983. Once again no handouts and would not have even thought about it. Having children was our responsibility. If you couldn’t survive on one income then you did not start a family. The thing that really makes me mad is compulsory super did not start until 1992, almost 30 years later for me. So no lump super to fall back on but we thought we would be secure at least owning our own home?

    • Valerie Myers  

      I was about to leave a comment until I saw yours Sue. You have said most of what I think. I don’t see a pension as welfare, we paid taxes so that those who went before us could have what I see as their right. We now get nothing except medication and bulk billing. Certain politicians have suggested that we liquidate our assets and leave nothing to our children, easy for him to say when he knows he will haveperks for the rest of his life as a retired poltician. Nows there’s an area that needs some attending taken.

  2. Marie Keating  

    Politicians seems to be unaware that many of us over sixty have not always or ever had compulsory superannuation, subsidised childcare, baby bonus, paid maternity leave or first home owners grants. If we had access to these, we would have sufficient superannuation not to need the pension. After July 2017, we loose the opportunity to contribute $35k annually to our funds. Have the consequences of this change been fully considered.

  3. Jean Bowen  

    We worked hard at many jobs to raise children and pay off our house, WITH NO HELP, why should we be penalised, we had no child care payments we shared the load with other parents. Our Super only started just before we retired. I say the Government MP’s are the privileged of our society and it should stop, we don’t need to give them expenses and huge pensions and we don’t need to be so over governed either, we don’t need full state parliaments. All these things are a drain on our right to an aged pension, perhaps they should try managing on a basic pension, I’d like to see that.

  4. As a Pensioner/DSP Recipient, I agree with the other comments. People of my age (late 60’s) have worked very hard for any assets that we have now. Made extra mortgage payments when we could, saved when possible, brought up a small Family of 3 Children without family taxes, child care rebates & received a miniscule amount of ‘child endownment’. We did without on so many occasions, so that our Children would have any extras. We have a home, very little super or extra dollars, why should we sell the Family home to make ends meet? Why shouldn’t our kids inherit their family home? If politicians felt the same way, instead of wanting to live off taxpayers money when they retire, watched their budgets & frivolous lifestyles, there would be enough to go around.

  5. Pauline Kilkenny  

    The family home that you live in should not be assessed as an asset as when you can no longer look after yourself and go into a home then the sale of that home pays for your retirement home fees.

  6. Fran  

    Have we missed the point. We paid a tax to cover a pension in our retirement. At that point no mention was made of asset testing. So if you worked hard, paid the tax then you are entitled to a pension surely. NZ does not asset test. Is the government trying to Penalise workers.

    • Janice Mallett  

      N.Z does not assert test, pension is for everyone, but it is taxed.

  7. Robin Henry  

    The greatest problem for us when the government changes our superannuation or pension rules is that at our age, we do not have the option of contributing more as we aren’t working. If we take cash out of the bank and put it into superannuation, it makes no real difference to our asset position. Sure, we may save a little tax on interest earned, but that is offset by the risk of super fund falls due to bad stock market positions. Either way we can lose.

    As far as the pension goes, we can’t do much about that either.If you rely on a pension and it’s reduced or taken away, you’re pretty well stuffed. If you have a house you sell off to live on the cash, you still have to either rent or buy another house – then you could be hit with stamp duty. It’s a lose, lose situation.

    The government needs to have an intermediate plan to allow retired people to live with dignity until superannuation has been running for 50 years (about an average working life) and then tell people to look after themselves with their superannuation. Perhaps people who downsize their housing should have stamp duty exemption on their new, smaller houses.

    The government lacks imagination. For example, when asset testing your house, an option would be to allow the first $500,000 of value (say) to be exempt and any amount over that taken into consideration when determining value of assets. . No solution would suit everyone, but I’m sure they could do better than they do.

    • Guy Flavell  

      But Robin, your own home is NOT included in the value of your assets for the pension.
      Even if your home is worth $millions and you have other assets exceeding around
      $200k then you still get a full or part OAP. For the life of me I can’t understand why
      people fortunate enough to be in this situation have any basis whatsoever for whinging.

  8. Hilary Mather  

    It is interesting to find out that 7.5% of our taxes should have been put aside for our pensions. Instead this has been raided by many governments for their own benefits and pensions. After 29 years of marriage my husband and I divorced at the age of 50. I have been on my own and supporting myself since then. I am now 67, and unable to retire. I have no assets, and just over 100,000 in super. I dread the thought of having to go to Centrelink and beg for a pension that will barely cover my rent let alone power costs and food. I am extremely frightened about my future. What happens if they make a mistake and overpay me? I am tired of hearing about people who do have houses and lots of super complaining about how they are suffering. I am tired of hearing about the politicians rapeing our taxes for their retirements and perks, private jets etc. I am not the only person in this position and we need help. I have no idea how I am going to survive, let alone enjoy any retirement. That should be my right. And I certainly cannot give anything to my kids.

    • Guy Flavell  

      Hilary, what a bloody great sob-story. Dearie, there’s a lot more pensioners out there
      far worse off than you … no super, no assets, no family support and paying private
      rentals at exorbitant rates. These are the REAL people with fair dinkum cause
      for fear of how they can survive on the OAP. By being carefully frugal most of them
      manage it, but sadly many wind up begging food parcels from St.Vinnies and the Salvos … and further damaging their already low self-esteem. By their standards, you’ve got it
      pretty good and you shouldn’t be complaining like this.

  9. Sue B  

    Hilary, Just to let you know that I’m just 60, have been on a DSP for 17 years. NO superannuation. I live in rental accommodation. I live in a large country city as I couldn’t afford the rentals in the big cities. Had to move from Canberra over 6 years ago when my ex was made redundant as couldn’t afford the exorbitant rents we were paying on 2 pensions – $365 pw ($730 pfn – 3 bed townhouse)- out of around $1400 pfn. Haven’t looked back. I’m separated, and now paying $150 pw for a 2 bed townhouse. I pay all my bills on a fortnight basis rather than when they come in. My 10 year old car and household goods are all I own. I don’t have any debts, so I can afford to ‘put aside’ around $150 per fortnight for such things as car rego & servicing, and dental bills, and ultimately any balance is going towards any unexpected bills. At least you have some funds to ‘keep you comfortable’ for quite some time yet.

    • Guy Flavell  

      Good on you Sue, a fabulous response. There must be countless pensioners like
      you (and me) out there trying to survive fortnight to fortnight and paying private
      rentals … quite possibly to many of the retirees that constantly whinge on Starts at
      Sixty. I’d just love them to have to exist on our incomes for a period of time … then
      they may just have some basis for complaint.

  10. Tests  

    I don’t understand why people are whinging here. Life is what you make it. If you put aside your money (save) and put it into something that will grow (invest), you will have something more to live on when you retire. There is some discipline to that. Also, divorce is a financially-destroying decision so we must put greater effort into strengthening our marriages. Too many make the decision to divorce without putting in the effort to work at difficulties. All actions have consequences, some of them lifelong. We need to create a culture that cares for the vulnerable but helps people to prevent themselves ending up in desperate situations in the first place.

    • Jean Walker  

      And I don’t understand how you can really believe that everyone is able to be in that lucky position you describe. Life may sometimes be what you make it, but sometimes life just happens to people and they have no control over it. Or perhaps they were not lucky enough to get a good education or training through no fault of their own and were on low wages that were only enough to cover expenses rather than being able to save. Everyone is born differently, brought up differently, educated differently and it’s all to easy just to say “everyone should be like me”.

  11. Therese  

    There is a lot of talk and mumbling about this 7.5% retirement tax that we have been paying for the last 50+ years. When is it going to hit mainstream media and the politicians held accountable for this theft

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