National Seniors Australia has called for an end to the “ludicrous” age pension ‘taper trap’, where saving more can mean up to $1,000 less in income a month.
National Seniors – which calls itself the peak advocacy organisation for older Australians – is calling on the Government to lower the age pension taper rate. The rate applies to age pensioners above a certain level of assets, gradually reducing the pension received.
National Seniors point out that the taper rate was increased in 2017 to $3.00, from $1.50, less in pension per fortnight per $1,000 in assets above the asset threshold. Though the same legislation that increased the taper rate also increased the asset thresholds for the full age pension (while lowering the threshold for the part pension). Also, the rate was halved to $1.50 in 2007.
National Seniors Chief Advocate Ian Henschke says the $3.00 taper rate penalises older Australians who have saved more for retirement.
The purpose of the taper rate is to reduce the age pension for people with higher levels of assets.
“It’s the taper trap targeting the savings of older Australians,” Henschke said.
“It acts as a disincentive for people who try to put away more for their retirement.”
“Someone who has saved twice as much as a retiree on a full pension, can be $1,000 a month worse off because of the taper rate. How is that fair?”
“It’s ludicrous and forces people who have put away money to spend it, so they stay under the threshold.”
Henschke said some people have spent money renovating or on an overseas holiday so they could “get a decent retirement income”.
National Seniors says it is not the only organisation calling for reduction in the taper rate, pointing to the Actuaries Institute, Rice Warner, the Grattan Institute and the Alliance for a Fairer Retirement System. The Grattan Institute for one has recommended the rate be lowered to $2.25.
Henschke said the expected retirement income review, along with the current sitting of Parliament, are “perfect opportunities” to lower the rate.
“The taper rate is integral to the age pension and its interaction with superannuation.”
National Seniors is still calling for an independent body to set the rate of the age pension, after its campaign on the deeming rate.