Retired public servants were enjoying incomes of up to $120,000 and still claiming the age pension until the government ended the "anomaly", Social Services Minister Christian Porter says.
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But pensioners accuse the minister of misrepresenting the issues in the debate and say only 120 people Australia-wide were receiving more than $80,000 a year from public service superannuation and claiming a part pension.
Nearly 35,000 former government workers around the nation will need to begin coping on Thursday with cuts to their incomes as they are either kicked off the pension or have their payments reduced.
The government says it is reducing access to the Centrelink age pension of retirees who are in state and federal "defined benefits" superannuation schemes, bringing their treatment in line with the vast majority of Australia's retired workers.
But retirees and their advocacy groups remain furious about the move, which reduces to 10 per cent the amount of superannuation income that can be exempted from Centrelink's income test.
Mr Porter said arrangements in place since 2007 left an "anomaly" allowing former public servants to draw six-figure annual incomes from their super while still being paid a part age pension by Centrelink.
The minister, in a letter to his Coalition colleague Mark Coulton, said a loophole had opened in 2007 allowing well-off public servants to claim the age pension.
"As a result of the changes made in 2007, there were people receiving over $100,000 a year from a defined benefit income stream and still receiving the age pension," Mr Porter wrote.
"For example, a retired state government public servant in receipt of age pension can receivea defined benefit pension of $120,000 a year with a deductible amount of 50 per cent, so that only $60,000 is assessed under the income test.
"Under this measure, the individual's deductible amount would reduce to $12,000 and $108,000 would be assessed under the income test and the individual would no longer be able to receive the age pension.
"At a time when expenditure on the age pension was projected to rise from $39.5 billion in 2013-14 to $72.3 billion in 2023-24 without any changes, the government considered this to be a fair and reasonable measure to support the sustainability of Australia' s welfare system."
But Mr Porter's words have infuriated one of Mr Coulton's constituents in his NSW central west seat, with retired public school principal Garry Grant saying the high-income comparisons were far removed from the reality for the majority of public-sector retirees.
"There is no mention that of the 47,500-approx victims of these unjust cuts, that over 60 per cent are on less than $30,000 per annum in defined benefit income," Mr Grant told Fairfax.
"Nor is there any mention that out of the 47,500 victims, 120 – yes, 120 – are in receipt of a defined benefit income stream of $80,000 plus."So much for the fat cats, rorters claims by Morrison and Abbott when this matter was on the floor of the lower house."
Mr Grant pointed to the exemption granted to retired Australian Defence Force personnel who will still be able to exempt 50 per cent of their defined benefits super payment from the Centrelink income test.
"This is good outcome for this group but it immediately brings on the glaring unfairness and anomaly of defined benefit recipient victims who are former police in various states' superannuation defined benefit schemes," he said.
