A fairer pension system
Targeting pensions to those who need it most
The Age Pension is our largest welfare payment, totalling an estimated $44 billion in 2015‑16. We also provide other pension equivalent payments, including $17 billion in Disability Support Pension.
The Age Pension provides a safety net for older Australians, but it is only one pillar of our retirement income system which includes superannuation and voluntary savings. As our population ages, we need to ensure the pension system is sustainable and fair.
A fair pension system
From 1 January 2017, the asset free area for pensioners will increase, allowing around 170,000 pensioners with moderate assets to receive a full or increased pension. At the same time, the asset test taper rate will increase from $1.50 to $3. This means for every $1,000 of assets over the asset free threshold, the pension rate will reduce by $3 a fortnight.
Currently, pensioners with substantial assets can still get a part pension. Without changes, a single homeowner could hold assets up to around $800,000 and couple homeowners could hold assets up to around $1.2 million, in addition to their family home and still be eligible for a part pension.
The changes in the Budget require those pensioners with substantial means to draw on slightly more of their assets to maintain their current income levels in retirement, while the Government continues to support those who need it most.
In a worst case scenario, this would mean a 1.8 per cent annual drawdown on their assets.
As a result, the Government has decided not to proceed with the 2014 Budget measure to index pension and pension equivalents by CPI.
Due to these changes, those who no longer receive a pension will remain eligible for a Commonwealth Seniors Health Card or Health Care Card.