Retirement
‘Perverse pension tax' unfairly impacts middle Australia
A couple that retires with a $1 million super balance will have less annual retirement income than a couple that retires with $400,000, according to new analysis.
‘Perverse pension tax' unfairly impacts middle Australia
A couple that retires with a $1 million super balance will have less annual retirement income than a couple that retires with $400,000, according to new analysis.
Industry Super Australia (ISA) said it had considered the Age Pension means test and found that in the next decade, more than 1 million Australians will be caught in an “unfair retiree tax that will mean they will end up with less spending money after saving more”.
ISA outlined that the means test curbs the government pension by $3 a fortnight for every extra $1,000 in savings that retirees have over the asset threshold – known as the asset taper rate.
“This harsh rate drastically wipes income from those who saved more,” it said.
According to the association, “The trick tax arithmetic creates a disincentive to save and punishes those who have taken responsibility for their retirement during their working life and built a modest nest egg.”
The taper rate doubled from $1.50 to $3 back in 2017.
ISA reported that for hardworking Australians who are retiring with $400,000 to $875,000 in super, “This perverse pension test means their retirement income actually goes backwards with the more they save.”
It gave the example of a couple who had saved more than $875,000 having $12,000 less per year to spend than if they had retired with $400,000.
Weighing in on the issue, ISA chief executive Bernie Dean said, “These workers have saved hard their whole life only to reach retirement and find out they are being penalized for their financial responsibility.”
“It provides a disincentive to save, it flies in the face of reason and is just plain unfair,” he continued.
Mr Dean said responsible retirees “deserve to be given a leg-up by the government – not dragged down by an unfair retiree tax”.
ISA outlined that the taper rate would be better positioned at $2 – better enabling the rewarding of retirees that save.
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