Cut pensioner poverty with targeted concessions
There is a better way to provide cost-of-living support to seniors. Here’s how.
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While some of us are doing ok financially in later life, there are some who are not.
The Organisation for Economic Co-operation and Development (OECD) estimates the proportion of Australians aged 65 and older in poverty is 20%.
The Grattan Institute, however, argues that poverty rate among the over 65 age group is about 10% when factoring in housing wealth.
A recent survey of older Australians, conducted by National Seniors Australia, showed that almost 40% of older renters and more than 30% of older households in the lowest income brackets said they experienced severe cost-of-living pressures – much higher than other groups.
Given this, have you ever wondered why governments don’t target additional concessions to those who need it most?
Commonwealth Concession Cards (from the Department of Social Services and Department of Veterans’ Affairs) are used to provide access to subsidised services and cost-of-living concessions at all levels of government. All pensioners are eligible for concessions via the Pensioners Concession Card (PCC).
There is currently no simple way to give additional concessions to those most in need. All pensioners receive the same concessions regardless of wealth and income.
For example, a homeowning couple can have up to $1,003,000 in assets (not including the principal place of residence) and receive the same concessions associated with a PCC as a couple with no assets and no home.
Even at a conservative estimate of return, a couple with a large assets base will have significantly higher income overall than a couple solely reliant on the pension with no assets. They can also draw on this wealth to fund consumption without significantly diminishing their overall income because the pension increases as private income and savings reduce.
If governments want to provide additional support to pensioners experiencing higher cost-of-living pressures, they cannot do this under the current system, where they can only deliver additional support to all pensioners – even when there may be a need to deliver additional support to those most in need.
This approach makes the cost of providing additional targeted concessions or supports prohibitively expensive, resulting in a lack of action from the government.
National Seniors Australia believes this could be solved by the Federal Government creating a Pensioner Concession Card+ (PCC+), which would make it easier for all governments, local, state, and federal to target additional concessions and supports to eligible pensioners.
Our policy initiative is now with the government after we included it in NSA’s 2024-24 Budget submission.
The targeted PCC+ would enable government to better support eligible pensioners with higher concession rates, dental subsidies, cheaper medicines, or health care rebates.
The Commonwealth would use existing customer data to tailor eligibility to those most in need. A person’s income and assets are already used to determine the amount of Age Pension they receive and could be used to determine eligibility for a PCC+ based on an appropriate criterion.
Pension poverty, adequately adjusted for housing wealth, could be used to determine who would be eligible for additional support via a PCC+ (for example, the same way that pension means test rules treat homeowners and non-homeowners differently).
Determining who would be eligible would require Treasury modelling to ensure only those most in need were receiving access to additional support.
The cost of providing a targeted PCC+ would be relatively small and involve administrative costs with setting up a new card within the existing system and costs associated with updating existing communications.
Funding any new concession/s would be a major cost but by targeting those concessions the cost to government will be small but the impact large.
For example, if 20% of pensioners (500,000) were assessed by Treasury as living in poverty, the government could use the PCC+ to:
Administer a targeted Seniors Dental Benefits Scheme (see Recommendation 7 of our Budget submission). If under an SDBS, a recipient was eligible for $500 per year for dental, this would cost $250 million per year to cover 500,000 pensioners holding a PCC+. Providing a SDBS to all pensioners would cost $1.25 billion.
Administer additional relief for those most in need (see Recommendation 2). Under the recent Energy Bill Relief Fund, all pensioners were eligible for up to $500 to offset energy bills at a cost of $1.25 billion. Under a PCC+ card, the government could have provided additional relief to 500,000 pensioners in need. For example, an additional $250 rebate for PCC+ holders would cost only $125 million compared to $625 million for all pensioners.
A benefit of the PCC+ is that it would provide additional support to pensioners with limited means and additional support as pensioners spend down their savings later in life.
Related reading: NSA Federal Budget Submission
