Changes to Deeming Rates and Pension Assets Test


November 07, 2016

 

I am glad I have an opportunity to speak on this very important motion. As the member for Lilley said, the government could not even muster enough speakers to speak on this motion.

I am glad I have the opportunity, because of the importance of this motion to pensioners around Australia. The government’s attack on the living standards of pensioners has been an issue which has come through the doors of my electorate office with alarming frequency since my election as the member for Wills just a couple of months ago. Only last month I met with two pensioners, Vic Guarino and Gino Iannazzo, from Australian Pensioners’ Voice. They formed in 2007 to represent the interests of Italian-Australian pensioners in my electorate. Of course, pensioners from all backgrounds, multicultural backgrounds, face the same problems, such as struggling to meet the costs of living, paying essential bills and receiving appropriate health services. Gino and Vic highlighted the mammoth issue faced by those who live, particularly, in the inner city, as well as other parts of Melbourne, where house prices have increased exponentially over the past decade. As such, for them, paying council rates has been very difficult on fixed incomes because, over the last decade, pensions and other fixed income streams have not increased at the same pace as home values have. I have heard countless similar stories from people who have worked hard all their lives who are now struggling in the current climate amidst skyrocketing costs of living coupled with a low interest rate environment.

Everyone should understand why pensioners crave the stability of cash interest. Retirees inherently do not have a high appetite for risk; they cannot weather periods of market volatility, and they do require a high level of liquidity of their assets. This is the simple reality of living off a nest egg—a finite pool of money. The low returns on cash interest are tough enough. As we know in reality, the rate of return on a term deposit from a major bank equates to only a skerrick of profit after inflation and usually requires you to freeze your money for an extended period.

My constituents know the impact of falling interest rates on the standard of living because they can feel it every day; it has a direct bearing on their standard of living. Let me be clear about this: these people are not at risk of taking fewer holidays or struggling to buy a new car this year; they are talking about the difference between eating or going hungry, buying medications or skipping prescriptions. These are not luxuries. We owe these people, who have contributed so much to our nation, something better.

My constituents also know that the rate used to assess income from financial assets, which determines how much pensioners receive, has not been adjusted by the federal government for 18 months. This means that pensioners already squeezed by low interest rates are also are being hurt by the Turnbull government’s failure to adjust deeming rates, as we have heard. Deeming rates assume financial assets earn a certain rate of income, regardless of what the actual earnings are. Currently, a single pensioner’s savings are deemed at 1.75 per cent on the first $49,200. Any amount over that is deemed at 3.25 per cent. It can be considered in no way fair to assume some are earning income that they are not, and then use this fake income to decide their benefits.

I know this issue is not limited to the people of Wills. We have heard in the chamber already this morning similar stories of pensioners been ripped off by illogical calculations being used in the determination of their pension amount. So I stand here and say loud and clear: the coalition is scalping pensioners through sham calculations. And I repeat here what I have said to many of my constituents already: this government is not looking after you; it is not looking after pensioners. The rates are supposed to reflect returns across a range of investment choices available in the market, but the Turnbull government is failing to act to lower them. That is simply not good enough. It is time for the Turnbull government to take action to reduce the pressure on pensioners by adjusting deeming rates. The government’s inaction on deeming rates comes as thousands of pensioners brace themselves for the effect of the changes to the pension assets test that will commence on 1 January 2017. In 2015, the Liberal government, in partnership with the Greens in another unholy alliance to attack the livelihoods of Australia’s pensioners, legislated new measures to tighten the assets test for the pension. From January 2017, the pension will reduce by $3 for every $1,000 in assets above the assets limit, increased from $1.50. Many experts think that this will create perverse disincentives for Australians to save for their retirement. This is one of the reasons that Labor wants to see a review into the pension means test. We believe that this review needs to examine the current interaction between the pension and superannuation systems, how the pension works and how the system might be improved to more effectively encourage super and other savings now and into the future.