SYDNEY, Australia – A new proposal is on the way to allow Australian retirees to work without having their pensions slashed.
With the new call to boost the post-retirement incomes for retired Australians, they will be allowed to work to gain more income and receive their full age pension amid the warnings that they are penalized by an irrational system that is aimed to protect the bottom line budget supposedly.
The National Seniors Australia has already spoken and sent their warning to the Retirement Income review board of the Treasury. They stated that older Australians are placed at a much greater risk of poverty if there will be no major reforms happening soon, such as abandoning the “unfair” incentives that block and discourages more savings for Australian people’s retirement.
Currently, the pension system in Australia penalizes retirees if they decided to continue joining the workforce. They pay a significant prize if they continue working to improve their retirement savings accounts and are hit with what is regarded as the highest tax rate slashed from their pensions, according to Ian Henschke, the chief advocate of the group of 130,000 members.
Mr. Henschke stated that once older Australians work more than one full day, the penalty of around 50 cents starts, which will be cut from their pension. He explained that Australian retirees opted to continue working to survive, and they are being punished for doing that.
Mr. Henschke further said that other countries have far more favorable tax placements compared to Australia, especially when it comes to paid work for citizens in their old age. Other countries have lesser pension poverty, he said.
Noting, the old age income poverty in the country is currently at 23.2%, while the old age income poverty in Canada is only at 12.2%. Further, the old age income poverty in New Zealand is just at 10.6%, according to the data from the Organization for Economic Co-operation and Development, as taken from men and women aged 66 years old and up.
The basic pension setting in Canada and New Zealand uses the tax system to recover the costs. As such, they can offer a much higher ability for all their retirees who choose to go to work, according to the submitted papers from the group to the review panel.
In New Zealand, in particular, retirees can go to work and earn the same in income as they were earning before and without any penalty in their pensions. Meanwhile, Canadian pensioners can earn as much as 75,000 Canadian dollars without significant reductions to their pensions, according to the group’s submission. It added than in Australia, a pensioner who continues to work can lose around 50 cents from their pension for each Australian dollar they are earning after the minimum $174 earning per day.
Mr. Henschke further stated that Aussie retirees shouldn’t be punished like this when all they wanted to do is to continue topping up their retirement savings for better years ahead. Australia couldn’t go on like this, he said. If the business will go, as usual, Mr. Henschke said that there would be an expected growing number of older Australian suffering from poverty.
He explained that this matter should be looked at very closely and with a matter of urgency.
Further, Mr. Henschke critiqued the taper rate. The taper rate determines the amount lost in the fortnightly pension payment for each $1000 worth of assets over the given threshold. He described the taper rate in the country as ‘grossly unfair,” given that it is used to penalize further Australians who had more tucked in their savings accounts.
He said that these types of unfair anomalies are the core of the issues Australians are experiencing at the moment. According to him, these perverse glitches in the system are leaning more towards budget savings for the country instead of equity and common sense.
Mr. Henschke further stated that the country should start encouraging more in public to fund their retirement savings accounts and work if they choose to, and not doing everything to discourage them from working.
He said that based on the Rice Warner data, the rate of gross domestic product (GDP) per capita on pension payments is expected to go down even lower in the future. He said that retirees are being portrayed as increasingly burdensome, which, according to him, is not the case at all.
Mr. Henschke pointed out that very soon, there will be a large number of self-funded retirees in the country, and there will much more part-pensioners compared to full-pensioners.
Meanwhile, Matt Grudnoff, senior economist at The Australian Institute, showed in his analysis of Treasury data that the superannuation tax reductions are starting to become as high as the age pension costs.
Based on the Treasury forecasts, the superannuation concessions in the country are expected to cost the budget in the 2019-2020 period, around $41.3 billion. It is also forecasted to grow to as much as $52.5 billion worth of costs for the 2022-2023 budget. In the same period, the assistance for retirees from the Commonwealth, or the age pension, is expected to increase from $48.5 billion to as much as $54.9 billion.
The research from Mr. Grudnoff also stated that while the pension payments are to make sure that majority of the benefits will go directly to those who need more help in terms of their retirement incomes, most of the superannuation tax reductions are going to the people who need aid with their retirement incomes the very least.
Meanwhile, the AMP Capital has also pressed for a more simplified version of the current system on submitting retirement income reviews. They noted that the sector’s consumer confidence has significantly dropped due to the countless changes to legislation, regulation, and taxation.
The super funds offered by the bank have been directly criticized previously and regarded as scandal-ridden by the Australian Council of Trade Unions. Right now, the AMP Capital is saying that in a global perspective, the current pension system that Australia has comes with its unique set of complexities, but still ranks as one of the best pension systems in the entire world.