The Abbott government will overhaul Australia’s pension system in next week’s budget, with over 170,000 low to middle income pensioners to be $30 a fortnight better off.
But the tightening of the pensions assets will hit wealthier retirees, with around 91,000 expected to lose access to the part-pension and 236,000 people to have their pensions decreased.
The changes replace the plan announced in last year’s budget to change the indexation of the aged pension from average weekly earnings to the lower Consumer Prince Index.
The plan triggered an angry backlash from voters and the Coalition backbench.
Social Services Minister Scott Morrison said on Thursday that nine in 10 pensioners would either be better off or not be affected when the changes come into effect in 2017.
“We’re helping those with more modest assets,” Mr Morrison told the Nine Network on Thursday.
Mr Morrison acknowledged on Thursday that the changes would not save the budget as much money over the long-term as the planned changes to pension indexation. Changing pension indexation to inflation would have saved $23 billion over 10 years.
Around 50,000 retirees on the part-pension will now qualify for the full pension.
Changes to pension taper rates mean that couples who own their home and have additional assets worth less than $451,500 will be better off.
Couples who don’t own property and hold assets worth up to $699,000 will also benefit from the changes.
The asset threshold to receive access to the part-pension will be reduced from $1.15 million to $823,000 for a retired couple excluding the value of the family home.
This means around 91,000 people will lose access to the part-pension.
“This is a sensible, common sense, modest measure,” Mr Morrison said.
But Mr Morrison said they would still get the Commonwealth Seniors Health Card, which gives them concessions on medicines and bulk-billing.
Mr Morrison expects the Greens to support the changes, ensuring their passage through Parliament. They will not come into effect until after the next election.
The changes will save the budget $2.4 billion over two years.
Mr Morrison that the changes were better than Labor’s plan to reduce superannuation tax concessions for wealthy retirees.
Council on the Aging chief executive Ian Yates said in a statement on Thursday: “This is a better place to start looking at any pension changes, but the proposal still needs to be scrutinised as part of a broader retirement incomes review.”
This story first appeared in The Age
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