Let’s change the pension rules
Pension reform isn’t over, with the Opposition committing to increasing the Work Bonus limit to $600. But is it enough?
Just when you thought the fight over older workers was over, Federal Opposition Leader, Peter Dutton, has renewed his party’s call for a doubling of the Age Pension Work Bonus limit as a centerpiece of his post-Budget speech.
National Seniors Australia welcomes the proposal as a step in the right direction but wants the policy to go further.
Right now, in sectors such as aged care, disability care, and health, there are huge workforce challenges. Retaining older workers is part of the solution, so too is migration.
But our pension system is broken because it unfairly penalises people who want to work, throwing up complicated administrative roadblocks in the name of budget restraint.
That is why National Seniors has been advocating for changes to pension rules for many years to remove unnecessary bureaucracy. The problem is that the government seems incapable of doing anything radical, tinkering only at the edges and creating more confusion.
The proposal to double the Work Bonus comes on the back of the current Federal Government’s introduction of a one-off increase of $4,000 to the Work Bonus.
While we were initially supportive of the government’s change, the one-off nature of the increase means workers have a benefit one year and nothing the next. What we know is that those pensioners who work often keep working long after retirement. Why? Because they need to!
Unfortunately, by making the increase a one-off bonus, this has added more complexity to the system, leaving older workers confused and worried about breaching the limits and incurring a debt to Centrelink.
This is hardly a system that supports workforce participation at a time when we need workers.
The proposal to double the Work Bonus to $600 takes us a bit further but it still doesn’t remove the barriers that need to be removed.
No one wants to waste time reporting income to Centrelink, nor do they want to say to their boss, “I can work this week, but I can’t next week, because I don’t want to lose my pension.”
But that is exactly what is happening and it’s making older people an unattractive option for employers.
National Seniors has long called for a Universal Pension. Why? Not because we want to give millionaires a pension, but because a universal pension (with proper tax reform to recoup costs) will be a simpler system for older Australians.
But we could do something else if that’s a bridge too far for Treasury and Services Australia. We could remove the Age Pension Income Test and retain the Age Pension Assets Test.
Remember, when you apply for a pension, the government uses both tests to determine how much pension you can have. Whichever test gives the lowest pension amount is the one Centrelink uses to determine your pension payment.
If the government was serious about making Centrelink easier to deal with, then it should be considering this idea. Why? Because it will encourage more older people to stay in the workforce – but only those who don’t have significant savings, because the assets test will still limit the amount of pension they receive.
Gone will be the need for deeming rates, gone will be the need to report earnings to Centrelink. All you will have to do is report your savings and investments as you do already, and the system will be simpler.
And if Treasury and Services Australia can’t stomach that, then give care sector workers a full exemption from the income test as a two-year trial to show this isn’t going to be a drain on the public purse but a boon for the economy and for the incomes or thousands of older Australians.
If you think this makes sense, then please donate to our Fairness in Retirement Income campaign or join National Seniors today.
