Pension budget changes approved: What does it mean?

Editorial Note: This article refers to the 2015-16 Federal Budget. For updated information on the 2016-17 Federal Budget, view this article instead.

In May this year, as part of the Federal Budget, the government announced its intention to tighten the assets test in relation to the age pension.

Essentially, the taper rate for the assets test for the part pension will increase from $1.50 to $3.00 for each $1,000 of assets beyond the assets-free threshold. This means eligibility for the part pension will cut out sooner which, according to estimations, will reduce or eliminate the part pension for approximately 320,000 retirees.

In dollar terms, it means is that instead of being able to own just over $1 million in assets (excluding the family home) and receiving a part Age Pension, the upper threshold will drop to $823,000.

On the other hand, the government will increase the assets-test free threshold from $202,000 for a single person who is a home-owner to $250,000 and from $286,500 to $375,000 for a couple. The government estimates that this will qualify an additional 50,000 part pensioners for a full pension under the new rules.

In effect it is a redistribution of taxpayer money from the better off to the less well off.

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In June Minister for Social Services, the Hon. Scott Morrison, announced the Government had reached agreement to secure the support of the Australian Greens in order to get the legislation through.

“The measure will rebalance the Pension Assets Test parameters by increasing the assets test free areas to support pensioners with low levels of assets and increase the taper rate by which a pension is reduced, once the free areas are exceeded,” said Minister Morrison.

“As a result of these changes it is estimated more than 170,000 pensioners with low and modest levels of assets will have their pension increased by around $30 a fortnight from January 2017, when these changes take effect.

“Those who lose access to the part pension as a result of the increase in the taper rate, to the settings that were in place prior to 2007, will be guaranteed access to the Commonwealth Seniors Health Card.

“This measure replaces the Government?s previous measure to limit indexation of all pension related payments to CPI that was contained in the 2014/15 Budget.”

You can access the Minister’s announcement here.

 

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