New call to lower the age pension assets test taper

By Grace Ormsby

September 17 2019
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National Seniors Australia has called for an end to what it calls a “ludicrous” trap which sees people who hold more assets pre-retirement earning up to $1,000 less per month in their retirement than their less well-off peers.

It has expressed a desire for the federal government to lower the taper rate used to gradually reduce the age pension for retirees and calculated on the amount of assets a retiree holds, not inclusive of the family home.

In a statement, it noted that, in 2017, the age pension assets test rate doubled from $1.50 to $3.00 per $1,000 of assets above the threshold of $394,500 for a couple with a home and $263,250 for a single pensioner with a home.

Chief advocate at National Seniors Ian Henschke said the current rate penalises older Australians saving more for retirement.

“It’s the taper trap targeting the savings of older Australians,” Mr Henschke said.

He considered the taper’s action “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?”

Calling it “ludicrous”, the chief advocate said it forces people who have put away money to spend it so they stay under the threshold.

“Put simply, the higher the taper rate, the less pension you get.”

He highlighted his knowledge of situations where people will spend money renovating their home or going on overseas trips so they can still get a decent retirement income.

The return of parliament and the upcoming retirement income review are perfect opportunities to lower the taper rate, according to Mr Henschke.

“The taper rate is integral to the age pension and its interaction with superannuation.”

According to National Seniors, the organisation is not alone in calling for action on the taper rate.

It said the Actuaries Institute, Rice Warner and the Grattan Institute have also called for a reduction to the taper rate.

National Seniors also commented that the taper rate issue is an example as to why it believes an independent body should be responsible for setting the rate of Australian pensions.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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Retirement