First Sign Of Flexibility On Pension Cuts Welcome But Broader Review Should Be The Focus

The suggestion that reduced pension indexation be compensated for by an independent review of pensions every three years is an encouraging sign that the Federal government is finally prepared to negotiate on its unfair proposal to change pension indexation, said leading seniors advocate COTA Australia today.

COTA Australia Chief Executive Ian Yates said he had been calling on the government for a comprehensive, independent retirement incomes review for many months without any response.

“We are prepared to discuss this and other government proposals providing government is prepared to discuss in an open minded way other issues and proposals, including superannuation taxation concessions and assets and incomes test,” Mr Yates said.

“CPI-only indexation of the pension erodes the income of full pensioners who have no other means of generating an income, and little or no assets. It’s the wrong place to start. That’s why its important to take a holistic approach to the retirement space and put everything on the table.

“Government and academics keep expressing concern about people with significant other income and substantial assets being able to arrange their affairs and receive a part pension; but the plan to change indexation does nothing to address that.

“At the same time the government persist in handing 80 per cent of superannuation concessions to the top 20 percent of income earners – who will never qualify for the pension anyway – so government saves nothing on pension expenditure. It is the wrong approach.

Mr Yates said this new three-yearly review proposal is an admission that pension incomes will go backwards under proposed changes to indexation.

“A better approach would be to review the indexation formula, the assets and income tests, taxation and super concessions in a coordinated way and get them right so we have a fair and sustainable system that does not need band-aids,” Mr Yates said.

“I welcome Social Services Minister Scott Morrison thinking about ways to ensure Australian pensioners are not pushed below the poverty line. Now he needs to look at the retirement income space in totality.

“Australian pensioners don’t understand why they continue to be in the firing line, while the government goes further and further into deficit to subsidise generous superannuation arrangements.

Mr Yates said a three yearly formal pension review was no guarantee that any recommendations would be adopted by the government of the day whereas the current indexation mechanism for the age pension is objective and keep the pension adjusted to daily living pressures.

Media contact: Ian Yates 0418 835 439, Olivia Greentree 0439 411 774.

COTA Australia is the peak policy development, advocacy and representation organisation for older Australians, representing COTAs in every State and Territory and through them over 500,000 older Australians.