Back to All News

Senator Rachel Siewert talks on pensions and retirement income reform

Video & Multimedia
Rachel Siewert 22 Jun 2015

I rise today to speak on the Social Services Legislation Amendment (Fair and Sustainable Pensions) Bill.

A decent retirement is essential in a caring society. This is why the Australian Greens have not ruled out changes to any part of our retirement income system if it makes the system fairer. Unlike other parties, we remain open to changes to both the pension and superannuation if those improvements result in a fairer system that ensures that all Australians can enjoy a decent retirement.

We note that there have been some substantial reviews into parts of the retirement incomes and the complexity of our income payments system in the past five years, namely the Henry Tax Review and the McLure report. Both these reports identified that significant structural change is required and made recommendations to both simplify the tax and transfer system and to make it fairer.

However, the Australian Greens recognise that complex change often requires some initial steps, to spark the momentum for broader change.  

We’re not the only ones, either.

A number of stakeholders have acknowledged that this is the right decision.

Uniting Care said today, “Uniting Care Australia is pleased that the government and the Greens have responded to ours and the calls of COTA and ACOSS to change the pension asset rules. This change is a constructive step in the right direction”

ACOSS have been pushing for this outcome for a long time and said on budget night, “This change in terms of moving away from indexation to a tightening of the assets test, we absolutely backed.”

And the Council of the Ageing clearly recognise that the review that we have secured will, ‘go some way to starting the process,’ even if the Labor party can’t.

This is how we get change – by building momentum. Imagine if we stopped trying every time the Government said ‘no, we won’t do what you want’

But this policy also stands on its own merits. This policy effectively reverses the decision of the Howard government to spend the benefits of the boom on tax cuts and bonuses to shore up support in the lead up to the 2007 election.

Senator Bob Brown said at the time, “The Howard government is focused on giving the aged pension to more wealthy retirees when it should be focused on raising the income of those currently struggling on the aged pension.”[1]

The Australian Greens opposed this measure in 2007 because it gave high income earners a more generous retirement income while doing nothing to address the needs of the most vulnerable. We now support its reversal, particularly as this measure ensures that more Australians who don’t have the advantage of a healthy super balance will be able to access a full pension.

The role of superannuation and assets in retirement

The debate about the impacts of this Bill have highlighted the role of superannuation as a complimentary policy to means-tested pensions that is designed to ensure that people save throughout their life for their retirement.

I know that Labor have been citing a whole range of statistics, supplied to them by the super industry. One of those statistics is that half of new retirees will be affected by these changes.[2] Without any further consideration that sounds quite scary, but one of the key conclusions that we draw from their submission is that more people will retire with superannuation assets that exceed the minimum thresholds into the future.

In fact, we know super is increasing. It is reflected by industry reports that superannuation hit a new record high this year and over the past 12 months there was a 14.3 per cent increase in total superannuation assets[3]. A disproportionate amount of this is going to the top 20% of people, but clearly everyone is benefiting from the higher compulsory super contributions from their employer and will retire better off than the previous generation did. 

So when we consider this measure, we need to stay clear-eyed about how much these ‘pensioners’ are holding in personal wealth.

Is it really fair for a millionaire to claim a pension? Is someone who has their own home plus half a million in the bank really comparing themselves to a single person with no home and no assets who is receiving a full pension, and thinking that the full pensioner has it better?

I note that a number of organisations have said that the seniors they represent will be worse off. BUT in making this assessment, they are also promoting the assumption that people shouldn’t and won’t draw down their superannuation assets to replace the Government assistance that they no longer receive.

While individuals have autonomy and control over how they structure their retirement incomes and are encouraged to find arrangements that best suit their personal circumstances, the policy settings in Australia have deliberately encouraged the accumulation of financial assets for retirement, not for estate planning.

In other words, people who have significant accumulated wealth are encouraged to spend it. After all, super in particular is a forced savings scheme that helps people fund their retirement. So some draw down of assets is clearly required and intended.

The Department modelling shows that an individual may be required to draw down up to 1.84% of their capital annually if those assets are not earning them any form of return at all.[4] At this rate, a single home-owner with half a million dollars in the bank would take at least 25 years to draw down their assets to $290,000, that is the level where they were eligible for a full pension.

However, we also note the evidence that the Committee received, that many part-pensioners are increasing their assets and for these pensioners, the time it would take to draw down their assets would be substantially longer than 25 years.

I acknowledge that some individuals have their investments invested in low-yield accounts and aren’t earning very much additional income from them.[5] It is clear that these individuals will need to adjust if they want to avoid drawing on their assets to the extent outlined by the Department.

While there will be some variation from person to person, it is clear that people will be able to supplement their retirement income and still achieve a decent life for the duration of their retirement if they have assets above the proposed minimum thresholds.

Modelling the affects

I also note that a number of organisations have tried to model the effects of the pension changes.

This has led to a range of claims and counter-claims being thrown about.

I note that the Labor party and the ACTU are quite happy to tell us how women will be affected in 2055 but I would urge some caution when citing projections that reach that far forward.

Let’s take a moment to reflect on how difficult it is to make such predictions about the future. Who could have predicted in 1975 that our world would look the way it does today? In 1975 we didn’t have the internet, but we did have free education.

What will things look like in another 40 years? Who really thinks nothing else will change between now and 2055.

Superannuation tax concessions

While I think we should take the modelling with a grain of salt, what has become clear is that superannuation tax concessions are not creating a sustainable system for the future.

The Financial System Inquiry shows that one third of all superannuation tax concessions are going to the top 10% of earners.[6] This means that the well-off are able to get richer, while those in lower and moderate income jobs are unlikely to have enough to retire comfortably.  Submissions to Tax Review have also demonstrated that a number of people will be unable to retire comfortably if we do not make structural changes to how people save for the future during their working life. 

Women in particular are poorly served by our current arrangements and here I do agree that numbers affected are likely to increase over time. When you drill down into Labor’s argument that 80% of women being worse off, you find that it’s based on this great little graph in Industry Super Australia submission. And when you look at that graph closely what you realise that what it is showing is that 60% of women in 2055 will not achieve a comfortable standard of living under the current policy settings.

In their terms, this is an annual income of $42k ($20k more than the basic rate of the pension for a single person)[7], so there is also an argument to be had there. But putting aside the argument about what a ‘comfortable’ or ‘decent’ retirement actually is, this demonstrates the challenges that we still need to resolve if we aspire to ensuring that women’s retirement incomes are higher than the basic rate of pensions. With this in mind, increasing the minimum thresholds in the assets test will assist those women who retire with only very limited savings by helping to ensure they are eligible for a full pension.

However, in the long run, we need to address the reality that women are paid 17% less than men; are regularly lumped with unpaid caring responsibilities; and as they are the majority of part-time workers they bear the brunt of the regressive, 15% tax on super. [8]

This is why the Australian Greens support this effort to make the system fairer by giving more to those with modest assets, while we build momentum for super changes.

Review into retirement incomes

A number of organisations have called for a broad review of retirement incomes that builds on the substantial body of evidence that already exists. In particularly they have been calling for an examination of the interaction between pensions, superannuation, taxation and employment.[9]

In response to this request, the Australian Greens have taken steps to ensure that retirement incomes are a chapter, not a paragraph, in their tax review. Stakeholders will not only have the extra time to put in submissions but also the opportunity to talk directly with the Government before and after the Green paper is produced.

It will be very hard for the Government to ignore the evidence organisations are preparing for the Tax Review, as it is clear Australians will demand a response that makes retirement incomes more, not less, caring and equal.

The Australian Greens are calling on the Government engage stakeholders in the Tax Review in good faith, and hope that all parties demonstrate their support for serious structural reform that does not exclude any aspects of superannuation, taxes, pensions or employment in order to reverse the growing wealth inequality between older Australian and ensure that all members of our community can live with dignity in retirement.

Hands off the pension

I’ll take this opportunity to remind the chamber that the Greens are the only party that has consistently stood up for those who rely on the pension.

You will recall some of the attacks on low income people that have taken place in here over the past few years.

Single parent pensioners

Let’s talk about single parents - who Labor pushed off the pension and onto Newstart in 2013. Data from Senate Estimates shows us that 95% of single parenting payment recipients are women, and they're struggling to meet essential living costs.

Where was the passion for the pension then?

Disability Pensioner

And let’s talk about those on a disability pension. It was Labor who brought in legislation that denied both young and older Australians access to the disability pension for 18 months, as well as supporting the Liberal Government’s attacks on young disability pensioners.

How can Labor say they care about those on the pension, when they have demonstrated their willingness to hit pensioners over and over again?

Policy not politics

It’s time to put policy, not politics first.

The Greens have thought long and hard about this decision. And by supporting good policy, regardless of who drafted it, we are showing a commitment to outcomes.

Even when it is hard or unpopular, the Greens are sticking to our principles rather than shoring up votes for the election.

Both Labor and Liberal are preventing real change by refusing to talk seriously about the changes we all know are required.

By supporting this measure, and continuing to build momentum for change, the Australian Greens build on a decade of work to improve retirement incomes for all Australians. .

Back to All News