It’s alarming that the Greens agreed to the government’s short-sighted proposal to change the taper rate for aged pension asset testing.
While many will incorrectly assume that the change properly targets ”wealthy” retirees, this view is completely misguided.
In fact, it targets lower and middle income retirees who have achieved modest savings, and leaves many to either drain their savings or struggle to live on little more than half the aged pension, with no benefits.
It is patently unfair to those with limited assets who cannot continue to work and earn.
If a pensioner couple with $275,000 in the bank and earning $60,000 a year from work-related activities inherits and saves $100,000, they lose only $1,625 a year of their pension as a result.
Yet if a part-pensioner couple who cannot earn, perhaps due to illness or disability, has $375,000 in the bank and no income other than perhaps a three per cent return on those savings, inherits $100,000, they lose $7,800 a year of pension benefits. This is patently unfair.
The most disturbing aspect of the proposal is that it creates a powerful incentive, in a low-interest environment, for people to spend up big and then claim a pension.
An asset-tested couple will gain $7,800 a year, indexed to rise twice yearly, if they spend $100,000 of their savings, but retaining it might potentially net them only $3,000 a year, reducing regularly if interest rates continue to fall.
By harshly punishing savers, the government is inviting younger middle-income Australians to reduce their saving for retirement and retirees to spend up big.
In the medium to long term, this can only increase the total cost of aged pensions and increase the number of pensioners who are unable to meet the costs of health care and aged care in later life.
I sincerely hope the Senate sees common sense and rejects the proposal, instead demanding the long-overdue comprehensive review of retirement funding.
Lorraine Cobcroft, Pottsville