Better targeting
Changes to the income test rules will ensure that the largest pension increases are targeted to those who need them most.
The Harmer Pension Review found that it was appropriate to limit the flow on of the increase to pensioners with low to moderate reliance on the pension.
This will help make pension reform affordable.
Ensuring pension increases go to those who need them most
The Harmer Pension Review found that it was appropriate to limit the flow on of the increase to pensioners with low to moderate reliance on the pension.
To improve targeting of the pension, the pension income test will be changed. The rate at which the pension is withdrawn for each dollar of additional private income will be increased from 40 cents to 50 cents for income above the free area (currently $138 per fortnight for singles and $240 per fortnight for couples).
Pension arrangements are set so that the income test reduces pension eligibility as levels of private income increase. The changes to the income test will ensure that pension increases can be targeted to those most in need, whilst supporting ongoing workforce participation.
Around 70 per cent of all pensioners will be unaffected by the pension income test change and will move to the new system immediately. This includes around 93 per cent of all single pensioners.
A smooth transition to a new system
Most existing pensioners — including all full rate pensioners — will be better off immediately under the new arrangements and will move directly to the new system.
Existing part‑rate pensioners will transition to the new arrangements at the point they provide a better outcome for them.
These pensioners will also receive an increase in their pension entitlements of $10.14 per week (single and couple combined).
They will continue to receive their existing entitlements, plus the $10.14 per week, all maintained in real terms, until the new system with an enhanced MTAWE benchmark provides them with a better outcome.