The global recession has highlighted the importance of the pension as a safety net for those most vulnerable in society. Despite the difficult fiscal circumstances, the Government has delivered substantial increases in pension payments, particularly for singles on the full rate who are doing it toughest, at a cost of $14.2 billion over four years. More assistance has also been provided for carers at a total cost of $1.8 billion over five years.
The Government has taken some tough savings decisions to support its pension reform package, ensuring that spending is focused where it is most needed, and that the increased cost of the pension is fully offset over the long term, despite the ageing of the population.
Rewarding work
Under the new arrangements, the Government will increase rewards to work through a Work Bonus. From 20 September 2009, half of the first $500 of fortnightly employment income will not count as part of the income test. This will ensure that part‑rate pensioners who work will retain more of their pension entitlements — up to $125 extra per fortnight.
Increasing Age Pension age
To respond to the long‑term cost of demographic change, and to reflect improvements in life expectancy, the Government will progressively increase the qualifying age for the Age Pension.
The Age Pension age will be increased to 67 years, at a rate of six months every two years, beginning in 2017.
Pension Bonus Scheme
The Government will close the Pension Bonus Scheme from 20 September 2009. Existing members of the scheme will continue to accrue entitlements.
Superannuation changes
To improve equity and contribute to a sustainable retirement income system, the Government will reduce the cap on concessional superannuation contributions from $50,000 to $25,000 and the transitional cap for the over 50s from $100,000 to $50,000. The Government will also temporarily reduce the superannuation
co‑contribution matching rate from 150 per cent to 100 per cent for contributions made in 2009‑10 to 2011‑12, and to 125 per cent for 2012‑13 and 2013‑14. The scheme remains generous despite the temporary reductions.
Family payments
From 1 July 2009, the Government will maintain higher income thresholds for certain family payments at current levels for three years and index family payment rates by cost of living only.
Private Health Insurance (PHI)
The Government will reduce the generosity of the PHI rebate for higher income earners.
Pension reform — ensuring long‑term sustainability