Illustration: Dionne Gain Former prime minister John Howard: had a rush of blood to the head. Photo: Kate Callas
Opposition Leader Bill Shorten. Photo: Alex Ellinghausen
Once Labor and the unions stood up for battlers. Now they’re robocalling seeking sympathy for millionaires who want to stay on the pension.
From the end of this week 91,000 extremely wealthy pensioners will be kicked off a payment that was meant to be directed to those in the most need. They’ll lose an average of $5000 per year each. As a consolation, they’ll get to keep the far more valuable Seniors Health Card, entitling them to discounted medicine under the Pharmaceutical Benefits Scheme, easier access to the Medicare Safety Net and rewards for doctors who bulk-bill them.
Some are complaining they might not continue to get a discount on council rates. Another 236,000 exceedingly well-off pensioners will get less of a pension, an average of $3400 per year less.
Astonishingly, at the moment it’s possible for a couple to own a home (of whatever value) and investments of $1.18 million and still get a part pension. Couples who don’t own their home can hold investments worth $1.33 million. The changes, from January 1, will cut those thresholds to $816,000 and $1.02 million.
What’s being taken away is relatively new. In 2007 John Howard had a rush of blood to the head. Fearing he was about to lose office, facing a surplus that approached $20 billion, and believing the mining boom would last forever, he declared Christmas in July. On June 30 he posted nearly every senior citizen in the country a cheque for $500. On July 1 he made most super payouts tax free, and on September 20 he cut the pension assets test taper rate from $3 to $1.50 per fortnight.
This meant that instead of losing $3 of pension per fortnight for every $1000 in assets they owned over the full pension threshold, retirees lost $1.50. They could own twice as much over the threshold as before and still get a part pension. The change to the taper rate cost $1 billion per year and created a new generation of entitled wealthy pensioners.
Scott Morrison is the first treasurer to have taken them on, and he did it while social services minister. Announcing the return to the $3 taper rate ahead of time in 2015 he said Howard’s $1.50 rate had been introduced when the budget was in surplus and was no longer affordable.
Anyone who felt disadvantaged by losing an average of $3400 or $5000 a year could draw down on their investments, which by definition would be substantial. The worst case would require the well-off retiree to draw down 1.84 per cent of their assets.
Drawing down is what savings in retirement are meant to be for. As Morrison put it, super “isn’t there as an inheritance program; it’s not there as a wealth transfer program; it’s there so people can save for their retirement and have a great standard of living, a good standard of living in their retirement, that’s what it’s for”.
Yet research by his department and the Productivity Commission finds that most retirees don’t want to run down what they’ve got. Many continue to accumulate wealth while retired and while on the pension.
During their last five years on the pension 42.5 per cent of those surveyed lift their asset holdings and 24.7 per cent maintain them.
It’s behaviour Labor is defending. It voted against Morrison’s changes in Parliament and accepted them only during the last election when it was searching around for billions to make its promises add up.
In doing so it also voted against the rest of Morrison’s package, which boosted the ease with which not-so-well-off retirees could get the pension.
At the moment a couple with a home can only own shares and investments worth $296,500 before losing the full pension. From January 1 the threshold climbs to $375,000. For a couple without a home it climbs from $448,000 to $575,000.
An extra 50,000 modestly well-off part pensioners will get the full pension as a result of the changes Labor and the unions are decrying. A further 120,000 will get a bigger pension.
Morrison is Robin Hood. He is giving more to those who need it most and taking it away earlier from those who don’t.
Unfathomably, Labor is styling itself as the Sheriff of Nottingham. And not for the first time. When Education Minister Simon Birmingham conceded last month that there was a limit to what the Commonwealth could spend on schools and said it might get more bang for its buck if it wound back its spending on over-funded private schools and directed it to those in need, Labor’s Tanya Plibersek maintained that no school should be worse off.
It’s the same party that at first opposed the Coalition’s moves to even up the unfairness in superannuation tax concessions on the spurious ground that they were “retrospective”.
Oppositions are meant to do more than simply oppose. They are meant to provide a moral compass by showing us what’s right. This one could start by welcoming the overdue change taking place on January 1.
Peter Martin is economics editor of The Age.
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