Millionaire pension couples are not rich! The pension changes are about middle Australia.
Van Badham reminds us that Bob Brown said the point was not to keep the bastards honest, rather to replace the bastards. In the pension deal, Van Badham says, the Greens have become the bastards.
From National Seniors this is what has been decided:
- From 2017, the assets test threshold for home-owning couples will be lowered from $1.15 million to $823,000. For single home-owners it will drop from $775,000 to $547,000. In addition, the current taper rate will double from $1.50 to $3.
Now a single person owning a home, big or small, and $550,000 of other assets would receive an income of $17,875 pa, using the current upper level DSS deeming rate of 3.25%. If a single person has no cash to invest they will get the full pension of around $22,365.
That’s if all your assets are in cash. According to Van Badham the test includes the valuation of home possessions such as furniture, jewellery, cars, retirement projects like boats, caravans or collections and heirlooms.
Pensioners also receive state concessions on rates, utilities and registrations. Also cheap prescriptions at the pharmacy.
Couples on a full pension receive around $33,717 a year. With no pension and cash of $823,000, earnings at 3.25% amount to $26,747.
I’m not sure you can get fixed interest at 3.25%. With shares I’d reckon at perhaps 4.5%, which would give a couple with $823,000 an income of around $37,000, but of course shares carry risk.
Van Badham says that the Tories:
- do not believe in pensions and state-provided mechanisms of income stability as a universal right, but only as a “safety net” for the very poor. The Greens are facilitating the realisation of that idea and destroying a key pillar of social equity by helping the Liberals further restrict pension entitlements.
Some countries like Britain and Sweden grant all retired workers a basic aged pension of some form. We don’t.
Tory policy is a disincentive for saving. If you do so, then you best blow it on luxuries and overseas trips. One way or another the the incentive is to deplete your savings and pass nothing on to your kids. Van Badham points out:
- one of the crucial economic mechanisms for realising home ownership will be removed from the economy: the mechanism of inheritance.
In return for the Greens support the Government has promised to examine tax concessions within the superannuation system in the next tax review. At the same time they’ve indicated that they would take no notice of the outcomes of the review.
And there was a $15 per week increase to the full pension.
What is needed, in fact, is a review of retirement incomes and end-of-life expenses like aged care. I haven’t investigated the issue fully, but I’m aware of people unlucky enough not to die in the own beds and needing intensive care having to sell their homes to buy their way in.
The Greens have a Factsheet by way of explanation. Some 327,300 will be negatively affected, with 90,000 losing their pension entirely.
The policy has been sold as only affecting the rich. This article, from May 2014, talks about what it means to be rich. People who are on $150,000 to $180,000 a year rarely consider themselves rich. Whether ‘rich’ or not, they are certainly wealthy compared to the median household income which, I think, lies in the region of $70,000. The article says:
- A middle income household is one with $41,236 after tax and levies while a low income household is defined as $24,700 a year.
Clearly the policy is not attacking the rich. The government will save $2.4 billion over four years at the expense of low to middle income oldies.
There is also an assumption that oldies don’t need as much money. That may be so compared with raising kids, but you still have big expenses, like replacing a car, painting a house or fixing the plumbing. We had a sewerage leak near our back stairs. A plumber and $10,000 fixed it!
Personally I’ve had continuing significant medical expenses since I was 60 and spend more than $150 a month in the pharmacy. Oldies often have to buy in services like gardening and cleaning.
Finally, Ben Eltham thinks it’s a good idea, in spite of the fact that:
- As the government’s figures make clear, a pensioner who owns her own home and also has $500,000 in assets will see her annual pension decrease by $8,200 a year.
$500,000 at 3.25% yields $16,250.
‘Millionaire’ couples earn at current deeming rates just $32,500 pa, less than the pension. The effect of inflation would almost halve the value over 20 years.
Eltham has bought into the notion that those losing out are “wealthier”. They are not, Ben, wealth is a different ball park. Jenny Macklin was quite right in calling the changes an attack on middle Australia. $2.4 billion is being extracted from people who are expected to live on something in the region of half medium incomes in the community while the wealthy carry on regardless.
Update: I think that what’s happening here is that if a couple has up to around a million dollars the system will likely strip out all their assets before they shuffle off this mortal coil. At some point above that people can float free and stay clear of the asset-stripping machine. The wealthy have no worries.