Pension changes confirmed... Here's what you need to know

Today Scott Morrison, Minister for Social Services has officially confirmed that changes to the age pension that will be outlined in Tuesday night’s Federal Budget. After months of speculation and concern around making the lives of older Australians more difficult, the confirmation from Mr Morrison is actually some very welcome news.

Not everyone is a winner, but not everyone is a loser either. In fact, the majority of pensioners will not lose their pension nor face cuts and a large selection of pensioners will actually see their pension increase. In some very good news, indexation changes will NOT be going ahead after the government floated the idea that increases could soon be in line with inflation instead of the average male weekly earnings.

The key changes to the pension are:

  • The asset tests are tightened. The assets-free threshold increased (to qualify for full pension) from $202,000 to $250,000 for single home owners and from $286,500 to $375,000 for couple home owners.
  • Asset taper rates are changed from $1.50 to $3 per fortnight.
  • The threshold for pensioners who do not own their home will increase to $200,000.
  • The maximum value of assets to quality for a part pension will reduce. The part pension will not be available to around 80,000 people after they reduce the asset threshold (excluding home ownership) from $1.15 million to $820,000 for couples and from $775,000 to $550,000 for singles.
  • Those who qualify for the part-pension under the new rules with “modest” assets will receive a small increase to the pension.
  • Pension increases will remain aligned with indexation and not inflation.

Mr Morrison said the changes, to come into effect in 2017, would see more than 170,000 pensioners receive a boost of about $30 a fortnight and save the budget about $3 billion over the budget period.

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“The Government is seeking to ensure fairer access to a more sustainable pension. These are the only changes the Government is putting forward for the pension,” he said.

“By reducing eligibility to the pension for those with more assets, they will become fully self-funded retirees,”

“This means, though, we must retain the incentives through the tax system for superannuation. The Government does not support Labor’s proposal to tax superannuants more on the income they have generated for their retirement”.

 

So tell us, do you welcome these changes? Are you happy with this approach? Do you consider this a good step in the right direction after last year’s budget fiasco?