The Government has introduced new budget measures relating to age pension payments. The Government’s rationale behind these age pensions changes is that our population is living longer and that older people should be supported to pursue opportunities late in life that promote “healthy, independent, connected and safe” lives (DSS, 2018).
The key measures affect the Pension Loan Scheme and the Work Bonus Program and these are detailed below.
In addition to these measures, the Government is also introducing new means test rules for “pooled lifetime products held by social security or Veterans’ Affairs income support recipients acquired on or after 1 July 2019.” For further information on the new means test rules, please see the Department of Social Service Factsheet.
The key measures
1 – Changes to Pension Loan Scheme
The Pension Loan Scheme allows aged pensioners to borrow against their property. These loans are tax free, however they are subject to a 5.25 per cent interest rate. The loans allow pensioners to access additional payments from the Government, supplementing their age pension on a fortnightly basis. Currently, the available fortnightly loan plus pension amount is capped at the pension rate, and therefore loans are not available to people receiving the full pension rate. From 1 July 2019, the maximum available fortnightly loan plus pension amount will increase to 150 per cent of the pension. The loans and interest can be repaid in full or in part at any time, typically when “the secured real estate is sold or from the person’s estate”. The Government estimates that this measure will cost $11 million over five years.
2 – Work Bonus Program
The age pension Work Bonus Program allows pensioners to earn a certain amount of income each years without affecting their pension payments. From 1 July 2019, the Government will increase the pension work bonus from $250 per fortnight to $300 per fortnight. This will allow pensions to earn up to $7,800 per year without affecting their pension. The Work Bonus Program will also be extended to “self-employed people who earn income from an engagement in gainful work” (as distinct from those who receive income through investment). The Government has costed this measure at $227.4 million over four years.
The Government will also provide wage subsidies of up to $10,000 to employers who employ older workers (over 50 years).
Analysis
The NSSRN supports these measures.
The Organisation for Economic Co-operation and Development (OECD) conducts a biennial study of age pensions in Australia and 33 other countries. In 2015, their report found that 36 per cent of pensioners in Australia were living below the poverty line (OECD, 2015). Therefore, the NSSRN supports any measure that acts to increase the income available to older people who are primarily reliant on aged pension as their source of income.
However, many aged pensioners will not be able to benefit from the expansion of these programs, particularly the Work Bonus Program. Many older people struggle to obtain work, often due to age discrimination. The Australian Human Rights Commission has found that 27 per cent of people over 50 living in Australia have had a recent experience of aged-based discrimination in the workplace (Irving, 2017). This was reinforced by figures that showed that one third of managers factored age into their decision about whether or not to employ a person (Australian Human Rights Commission, 2015). Many other older people will not be able to work because of illness or disability. Statistics show that approximately half of people aged over 65 years old live with a disability (ABS, 2015).
The NSSRN is particularly concerned about the experience of older women, who are more likely then men to experience poverty in retirement (O’Keefe, 2016). Unaffordable housing has caused a significant rise in the number of homeless older women, particularly those who are single (Francis, 2017).
Although we support these measures, we are mindful that many people on aged pension are living in poverty and not able to work to supplement their pension payments. Although many aged pensioners own their own home, there are a number of people on the aged pension who will not be able to access the Pension Loan Scheme, due to their lack of home ownership. These people, with limited assets, are more likely to experience financial disadvantage.
References:
Australia Bureau of Statistics (2016), ‘Older People’, Disability, Ageing and Carers, Australia: Summary of Findings, 2015 (Report 4430.0), Retrieved from http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/4430.0Main%20Features302015?opendocument&tabname=Summary&prodno=4430.0&issue=2015&num=&view=
Australian Human Rights Commission (2015), National prevalence survey of age discrimination in the workplace 2015: Forward, Retrieved from https://www.humanrights.gov.au/our-work/age-discrimination/publications/national-prevalence-survey-age-discrimination-workplace
Francis, A (2017, October 22). ‘Australia’s ‘tsunami’ of homeless older women something ‘we should have seen coming’, ABC News (Online). Retrieved from http://www.abc.net.au/news/2017-10-22/tsunami-of-homeless-older-women-could-have-been-foreseen/9074360
Irving, J. (2017, April 28). ‘Age discrimination in the workplace happening to people as young as 45: study’, ABC News Online, Retrieved from http://www.abc.net.au/news/2017-04-28/age-discrimination-at-work-starts-at-45-study/8480992
O’Keefe, D (2016, March 9). ‘One in three older women living in income poverty in Australia: study’, Aging Agenda. Retrieved from https://www.australianageingagenda.com.au/2016/03/09/one-in-three-older-women-living-in-income-poverty-in-australia-study/
Organisation for Economic Co-operation and Development (2015), Pensions at a Glance 2015: Old-Age Income Poverty, Retrieved from https://www.oecd-ilibrary.org/docserver/pension_glance-2015-28-en.pdf?expires=1527040662&id=id&accname=guest&checksum=A70B67BA5493C497242B2FDD416A87E9, p171.