Retirees have warned the government they will not stand for being used as a cost-saving measure and have demanded an independent arbiter plays a key role in the way their payments are determined.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
National Seniors chief advocate Ian Henschke said while the government's move to reduce deeming rates was a welcome one, the fact it had waited so long and only changed the rates after a strong public campaign highlighted the trouble with the current system.
On Sunday, the government announced deeming rates - the rate of return assumed on the financial assets held by part pensioners and used to determine their fortnightly payments - would be cut from September 20.
The lower deeming rate, which applies to assets of less than $51,800, will be sliced to 1 per cent from 1.75 per cent from September 20. But the upper rate will only be cut a quarter percentage point to 3 per cent.
The move, which will cost the budget $600 million over the forward estimates, is the first change to the deeming rate since early 2015 despite a large fall in official and commercial interest rates.
The government believes the change will deliver up to $40.50 a fortnight extra for couples, equivalent to $1053 extra a year, and $31 a fortnight for singles, or $804 a year. The payments will be backdated to July 1.
Mr Henschke said while the change to the lower deeming rate would be welcomed by retirees with small nest eggs, the ultimate benefit would equate to little more than an extra cup of coffee a week for most.
He said the government's refusal to move on the deeming rate over recent years - the longest period of stable deeming rates since their inception in the early 1990s - was more about protecting the budget than looking after the interests of retirees.
The system had to be changed so that an independent authority set future deeming rates.
"It's all right for an independent tribunal to decide on politicians' pay but they don't want the same independence when it comes to the income of retirees," he said.
"They've saved probably at least $1 billion by not moving the deeming rate since 2015. That's four years and four months that they've used pensioners to fix the budget."
The Council on the Ageing said the government's changes were a "reasonable, balanced response to a complex issue" but also called for an overhaul of how the deeming rate is set.
But Treasurer Josh Frydenberg ruled this out, saying the government had no plans for reform.
He defended the decision to only reduce the top deeming rate a quarter percentage point, saying retirees with assets over $51,800 were more likely to be earning higher returns from assets such as shares and other investments.
The responsible minister, Social Services Minister Anne Ruston, said the cost of the change would have to be borne by the budget.
"The Treasurer has indicated it won't affect the surplus that's projected for 2019-20. But it's
something we believe was an appropriate action to be taken so the money will be made available," she said.
Labor social services spokeswoman Linda Burney said the government had used pensioners to boost the budget for the past four years.
"The Liberals and Nationals don't deserve any congratulations. They have been dragged kicking and screaming to this by pensioner groups and Labor," she said.
There is some pressure within the government to use its upcoming review of retirement incomes to ditch its plan to lift the superannuation guarantee to 12 per cent by 2025. It is currently 9.5 per cent.
Mr Frydenberg said the change had already been legislated with the government not entertaining any plans to change it.
Shadow treasurer Jim Chalmers said Mr Frydenberg was giving himself and the government room to abandon the commitment.
"Frydenberg given multiple opportunities to rule out changes to super guarantee and won't do it. Clearly gearing up for another attack on workers' retirement savings, caving in to backbench pressure," he said via social media.
- SMH/The Age
