Squeeze on Pension

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Squeeze on Pension

Gerard McManus, The Herald Sun

February 26, 2004

Thousands of Australians nearing pension age could be affected by a government clampdown on retirees who shift assets to gain benefits.

The Howard Government will cut the current assets exemption test in half, in a bid to stop the wealthy getting a pension.

The move is part of a dual government strategy to make the old-age pension increasingly harder to get, while enticing people into providing for their own retirement.

The clampdown is expected gradually to lead to a reduction in pension costs of more than $100 million a year.

But Morrie Mifsud, of the Combined Pensioners and Superannuants Association, warned that tightening the assets rules could hurt more than just those who are rorting the system.

It could leave many asset-rich retirees worse off than pensioners.
"We applaud government moves to crack down on the greedy, but not the needy," Mr Mifsud said.

"If people are getting money they are not morally or legally entitled to, then the government should be cracking down on them.

"But there are people who are barely above the assets line who can often be worse off than people on the pension."

Mr Mifsud said many asset-rich retirees received less income than pensioners, and were not able to get any pensioner concessions.
Under current rules, a couple over 65 can own their own home and have assets of up to $466,500, and still get the pension.

If they put other financial assets into a "complying income stream", they can still gain a full aged pension.

Under new rules, the exemption for complying income stream products would be reduced from 100 per cent to 50 per cent.

The asset test crackdown is aimed mainly at wealthy people who claim a part-pension, the pension card, and other benefits such as cheaper water rates, electricity and gas.

But existing pensioners -- even multi-millionaires who are already receiving the pension by manipulating the system -- will not be affected by the changes, which come in after September 20, according to Treasurer Peter Costello.

And any income streams purchased before that date will also not be affected by the crackdown.

Mr Costello said the review of the social security assets test for complying income streams was part of a change of thinking about who should be eligible for the old-age pension.

"The Government is concerned that this exemption (for complying income streams) has enabled people with significant assets to claim an age pension," he said.

"This is inconsistent with the intended role of the age pension to support people who have not been able to fully save for their retirement."