The government will save $2.5bn by reducing or withdrawing payments to hundreds of thousands of part-pension recipients, while 170,000 others on the full pension will see an increase in funding.
The government’s announced changes to the pension were confirmed in the 2015 budget with 236,000 pensioners expected to see their payments reduced and 91,300 people expected to lose it completely as a result of changes to the assets test and tapering rates.
The threshold at which the part-pension cuts out will be reduced but the maximum value of assets a person can own in order to receive the full pension will increase.
Couples who own their home will be able to have $823,000 in assets before they lose the part pension, a decrease from $1.15m. This will see 91,300 people no longer qualify for the pension and 236,000 see their pension reduced.
The maximum value of assets a person can own to receive the full pension will be increased to $250,000 from $202,000 for single home owners and to $375,000 from $286,500 for couples who own their own home. The changes mean about 170,000 pensioners will receive an extra $30 a fortnight.
The taper rate will double from $1.50 to $3, meaning that for every $1,000 of assets over the asset-free threshold, the pension will be reduced by $3 a fortnight. The proposal replaces government policy announced in the 2014 budget that the indexation rate of the pension would be changed from being pegged to average weekly male earnings to being pegged to inflation, which would have caused a decrease in real terms over time.
The social services minister, Scott Morrison, has already conceded the new proposal will not save as much as the original in the long term, though it is projected to save $2.4bn over five years. Pensioners who will have their pension reduced or lost altogether will be eligible for the Commonwealth health seniors’ card or healthcare card, which provides concessions on pharmaceuticals.
The changes are due to take effect in 2017.
