Your retirement wealth is being 'slashed' by pension changes

According to a report published by the University of Melboune and advisory company Willis Towers Watson, ‘middle Australia’ has lost all of the recent gains from strong investment markets because of a new assets test.

Samples from the 2010 HILDA surveys were used to determine how prepared Aussies aged between 25 and 64 were for retirement, assuming they all retired at 65 and lived until 90.

What was revealed was that changes to the assets test, which came in under the Abbott Government, left a large percentage of couples in an ‘uncomfortable’ position coming into retirement.

According to the Association of Superannuation Funds of Australia (ASFA), to retire comfortably you should be able to live on $58,128 a year (as at 2014), and prior to the changes 62 per cent of couples were able to do so.

Not now. Only 51 per cent of couples would have that benefit.

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Dr Carsten Murawski from the University of Melbourne and the report’s author told The New Daily it was “concerning” that retiree wealth is effectively being “taken away” by the government.

“We would like to see the percentage of people who are on track to have adequate income increase over time, and the fact that these increases are now being taken away, if you like, by changes to the legislative framework, and particular to the aged pension, is concerning,” Dr Murawski says.

He says that instead of using super and other savings to prop up people’s retirement savings, the change of the age pension rules “basically just balances these increases, or takes them away”.

As a single retiree you are less affected by the changes.

However, retirees with medium-sized super balances are said to be the group most impacted by the changed assets test.

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The Australian Institute of Superannuation Trustees (AIST) says that while many retirees will be unaware of the changes, it will “continue to advocate for a review of the taper rate so that the impact on middle Australia is less severe”.

The changes to the assets test were legislated by the Government with the support of the Greens. It says the change was made so that Aussies of low socio-economic standing could enjoy increases to their pension payment.

When it was announced in 2015, then social services minister Scott Morrison said more than 170,000 pensioners with “low and modest” levels of assets would see a $30 increase in their fortnightly pension payment from January 2017.

Do you feel you will be able to retire comfortably? What financial challenges do you face as you move into retirement? Are you concerned about having to live on a pension?

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