If Treasurer Joe Hockey is serious about ending the culture of entitlement, he should look to address the pension means test that allows millionaires to receive welfare — literally.
Under the current pension asset and income test, if a retired couple has assets worth more than $1 million excluding the family home plus a fortnightly income of up to $2817, they will still receive a part pension and associated pensioner concessions, including the valuable Seniors Health Card.
These excessively generous arrangements have allowed the aged pension to become a quasi-universal benefit, replete with perverse incentives to minimise assessable income and assets in order to qualify for the taxpayer-funded retirement top up.
The current pension arrangements are poorly targeted, encouraging dependence on government hand-outs, and are permitting elderly people who could support themselves to help themselves to younger people’s income.
Baby boomer retirees are being encouraged to blow their superannuation on overseas holidays, and/or gift their children large home deposits, and/or purchase large means-test exempt family homes in order to get on the pension.
Financial planners market investment schemes yielding income streams that will beat the means-test and qualify for a part-pension.
Many self-funded retirees understandably feel like they are playing a mug’s game by prudently supporting themselves. They and other ordinary taxpayers — including archetypal “battlers’’ and “working families’’ — are being forced to subsidise the lifestyles of wealthy retirees and the inheritances of their children.
If we want to limit ageing-related government spending we need to encourage retirees to be self-reliant, end pensions for millionaires, and stop people from taking their superannuation as a lump sum and splurging on expensive holidays and houses.
As well as adjusting the pension means test, alternative policies could include requiring people to use their super to fund retirement living expenses, either by making annual withdrawals or purchasing a private pension investment plan.
We could also align the pension age and superannuation preservation age (currently 60) to prevent people from retiring early, exhausting their super, and then going on the pension.
And the family home — the principal asset most Australians use to save over the course of their lives — could also be included in the means test. This would encourage the elderly to either downsize their residences or take out reverse mortgages to support themselves.
Dr Jeremy Sammut is a research fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > Getting millionaires off the old-age pension
Getting millionaires off the old-age pension
If Treasurer Joe Hockey is serious about ending the culture of entitlement, he should look to address the pension means test that allows millionaires to receive welfare — literally.
Under the current pension asset and income test, if a retired couple has assets worth more than $1 million excluding the family home plus a fortnightly income of up to $2817, they will still receive a part pension and associated pensioner concessions, including the valuable Seniors Health Card.
These excessively generous arrangements have allowed the aged pension to become a quasi-universal benefit, replete with perverse incentives to minimise assessable income and assets in order to qualify for the taxpayer-funded retirement top up.
The current pension arrangements are poorly targeted, encouraging dependence on government hand-outs, and are permitting elderly people who could support themselves to help themselves to younger people’s income.
Baby boomer retirees are being encouraged to blow their superannuation on overseas holidays, and/or gift their children large home deposits, and/or purchase large means-test exempt family homes in order to get on the pension.
Financial planners market investment schemes yielding income streams that will beat the means-test and qualify for a part-pension.
Many self-funded retirees understandably feel like they are playing a mug’s game by prudently supporting themselves. They and other ordinary taxpayers — including archetypal “battlers’’ and “working families’’ — are being forced to subsidise the lifestyles of wealthy retirees and the inheritances of their children.
If we want to limit ageing-related government spending we need to encourage retirees to be self-reliant, end pensions for millionaires, and stop people from taking their superannuation as a lump sum and splurging on expensive holidays and houses.
As well as adjusting the pension means test, alternative policies could include requiring people to use their super to fund retirement living expenses, either by making annual withdrawals or purchasing a private pension investment plan.
We could also align the pension age and superannuation preservation age (currently 60) to prevent people from retiring early, exhausting their super, and then going on the pension.
And the family home — the principal asset most Australians use to save over the course of their lives — could also be included in the means test. This would encourage the elderly to either downsize their residences or take out reverse mortgages to support themselves.
Dr Jeremy Sammut is a research fellow at The Centre for Independent Studies.
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