Retired teachers are among those hit by recent changes to age pension entitlements.
From January 1, the pension taper rate increased from $1.50 to $3. This means that for every $1000 of assets beyond the assets-free area ($250,000 for a single homeowner and $375,000 for a home-owning couple) the pension decreased by $3 per fortnight or $78 per year. The upper limit of the age pension assets test drops to $542,500 (from $793,750) for singles, and $816,000 (from $1,178,500) for couples.
As a result of the government’s changes more than 300,000 retirees will lose some, or all, of their age pension entitlements.
The cuts affect middle Australia. For example, a couple owning a home now lose eligibility for the full age pension if they have around $350,000 in assets. The amount that retirees lose tapers away much more steeply than before. A couple who previously received a part-pension of $250 per week now receive no pension.
People in defined benefit schemes such as the State Superannuation Scheme are particularly affected because they entered into financial arrangements years ago, and these cannot be adjusted. It means these retirees will have a lower standard of living in retirement; many cannot, nor should they have to, go out and work again to make up the difference.
Among the more significant features of the changes is the fact that there are more than 330,000 Australian pensioners are worse off. The average loss of income for a part-pensioner is $130-$135 per week and some pensioners will lose more than $200 per week.
The changes target older Australians with just an average amount of assets. Most of the richest older Australians are unaffected by these changes. The changes will most certainly force people to run down their life savings faster.
Federation is working with the ACTU, Unions NSW and other branches of the Australian Education Union to raise community awareness on the impact of the changes and provide resources to members to influence a change of government policy. To this end, materials have been developed that are available on Federation’s website here.
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