Australian Greens' Additional Comments
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
We note that there have been some substantial reviews into retirement
incomes and the complexity of our income payments system in the past five
years, namely the Henry Tax Review and the McClure 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
However, the Australian Greens recognise that complex change often
requires some initial steps, to spark the momentum for broader change.
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
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 main committee report investigates
the impact of the proposed pension asset test in detail, so this report will
not restate that evidence. However, the Australian Greens have some additional
comments to add to those expressed in the main report.
Given the amendments to the Bill, introduced to the House of
Representatives on 18 June 2015, that withdrew schedules 1, 2, 4, 5 and 6,
these additional comments will only address schedule 3 of the Bill in detail.
The Australian Greens note the comments in the main committee report with
regards to the other measures but will reserve its consideration of these
matters in more detail if they are re-introduced as new Bills. We have concerns
about the portability and defined benefits measures and are already on the
record opposing the education supplement cuts. We note that schedule 4 that
dealt with senior supplements was passed by the Senate on the 22 June 2015 and
so will not be considered further.
The role of superannuation and assets in retirement
The submissions highlight 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.
For example, the Industry
Super Australia (ISA) submission states that half of all new retirees will be
affected by these changes.
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.
This assertion that super is increasing is reflected by industry
reports. The Association of Superannuation Funds of Australia (ASFA) reported
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
A disproportionate amount of this is going to the top 20 per cent of people,
but clearly everyone is benefiting from the higher compulsory super
contributions from their employer and will retire better off than the previous
Some submitters have argued that the
seniors they represent will be worse off but in making this assessment, they
promote the assumption that people shouldn't and won't draw down their
superannuation assets and that the Government assistance that has been
withdrawn will not be replaced.
The Department of Social Services (department) reached a similar
conclusion in their submission that more retirees will have accumulated assets
upon retirement, but go on to argue that rather than being partially subsidised
by the Government, these retirees will now be required to draw on those accumulated
This evidence shows that at present a number of part pensioners are living on a
mix of Government payments and interest payments to avoid touching their
capital base in order to ensure that they pass their accumulated wealth on to
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.
The evidence from the department clearly demonstrates that it is the
intention of this policy to ensure that people who have significant accumulated
wealth are encouraged to use this to help fund their retirement needs, while
those with more modest means can rest assured they too will be able to have a
dignified life in retirement by relying on the aged pension.
Asset income estimates and draw-down figures
A number of organisations have tried to
model the effects of the pension changes. Of particular interest was the
amount that superannuation and other cash assets might earn in interest
payments or other income. Understanding how much income individuals derive from
their assets is also necessary in understanding how individuals affected by
this measure would be required to draw on their assets (their capital) to
replace the pension that they are no longer receiving. This was the subject of
some close examination by a range of submitters and the Australian Greens
acknowledge their efforts to generate detailed material for the committee to
As discussed above, 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 per cent of their capital annually if those assets are not
earning them any form of return at all.
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. We also note the evidence presented
in the committee report, that 42 per cent of 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.
However, the Council of the Ageing (COTA) submission noted that some
individuals have their investments invested in low-yield accounts and aren’t
earning very much additional income from them.
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.
The Australian Greens also note the comments from ISA that as a result
of these changes pensioners may be subject to an income rather than an assets
After reviewing the evidence provided by the department provided during Budget
Estimates, it is clear that some pensioners with modest assets may be subject
to the income rather than the assets test. However, the department’s
microsimulations (using actual pensioner data) demonstrates that 171,000
pensioners would be better off in the first instance even after taking into
account the interaction of both the asset and income test.
The Australian Greens are satisfied that the Government have not overstated who
will benefit from the measure.
After reviewing the evidence, the Australian Greens do not believe that
this measure will leave those with significant assets unable to enjoy a secure,
dignified retirement, even though it withdraws some Government assistance. We
also note that the pension remains available to anyone whose assets decrease
below the new thresholds.
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 per cent of earners. 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
the numbers affected are likely to increase over time.
One of the worrying trends that the ISA submission identifies is that 60 per cent
of women in 2055 will not achieve a comfortable standard of living under the current
policy settings, because they won't retire with enough money to support
In their terms, this is an annual income of approximately $42 000 ($20 000
more than the basic rate of the pension for a single person).
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
ensuring they are eligible for a full pension.
However, in the long run, we need to address the reality that
women are paid 17 per cent 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 per cent tax on super. 
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
Review into retirement incomes
A range of submitters have called for a
broad review of retirement incomes that builds on the substantial body of
evidence that already exists. In particularly a number of submitters called for
an examination of the interaction between pensions, superannuation, taxation
In response to this request, the Australian Greens have taken steps to
ensure that retirement incomes are a chapter, not a paragraph, in the
Government's 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
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. We need to
keep superannuation in particular on the national agenda and the Australian
Greens believe we can do that by ensuring it gets proper consideration in the
Tax Review, along with employment, pensions and taxation.
We need long term change in our approach
to retirement incomes; the Howard Government changes were bad policy that the
Greens have a long history of opposing.
Furthermore, for those who have had the benefit of policies that have assisted
them to accumulate superannuation, it is appropriate that those individuals now
draw down on their super over the course of their retirement.
For these reasons, the Australian Greens
believe it is appropriate to pass schedule 3 of the Bill when it comes to the
The Australian Greens
recommend that the Government engage stakeholders in the Tax Review in good
faith, with a view to properly understanding the policy failures that will lead
to most Australians retiring with an income that is not over and above the
basic rate of pension.
That the 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 Australians and ensure that
all members of our community can live with dignity in retirement.
Senator Rachel Siewert
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