Tag Archives: retirees’ living standards

“Middle-class” welfare goes to seniors, too.

March 17, 2014
deck chairs

How rich is too rich to get a government welfare payment? Would you say a couple who owns their home, has an investment property or shares worth over $1 million, has no children to support, doesn’t work but still has a taxable income of $80,000 a year (or more in untaxed income from super)….would you say this couple needs a welfare payment? Well, retirees who fit this description receive the Seniors Supplement, a payment worth $858 a year or $1294 for couples. It’s one of the extras that can pop into your bank account just because you’ve reached the distinguished age of 65.

Some people I know are hitting the magic number and discovering the government keeps giving them money even though they’re comfortably off. It’s very nice. The Seniors Supplement is meant to help non-pensioners with regular bills such as electricity or car registration. But for some it will go towards the Pacific cruise or skiing in New Zealand – and frankly they’re a little embarrassed. If the country is in some “budgetary crisis” as the government insists, they wonder should middle-class retirees like themselves receive these payments. As relatives of mine said recently when they discovered to their surprise they’d qualified for a part Age Pension and the attendant concessions, “We don’t really need it.”

With a tough budget expected, the concessions and payments to older people are in the spotlight. From increasing the pension age to 70 to tightening the pension asset test, there’s no shortage of suggestions. Some people argue seniors should be immune because, well, they’re seniors, and most of them live modestly. The Council on the Ageing (COTA), a respected voice for Australian seniors, has expressed alarm that older Australians are being picked on: “There is a concerning trend…that seniors should cough up for the good of the nation….that slugging older Australians is an easy answer for budget shortfalls.”

At times like this everyone says, “Don’t hit us, hit the rich.”  But in Australia there aren’t enough rich to make a difference to revenue. The middle-class may have to give a little, and that includes seniors. Australia is a low-taxing nation that spends less than the average developed country on benefits. If we want to fund the Gonski education reforms and the National Disability Insurance Scheme and rising health and age care costs we can take the road to higher taxes. Or we can slash public services and go further down the user-pay route. The third way is to re-distribute the money we already raise from taxes, reducing welfare paid to the comfortably off, regardless of age, and targeting spending on the needier and on projects that benefit us all.

So I come back to my question. Should a retired couple who owns their own home, and also a $1 million second property or parcel of shares of that value, and earns $80,000 taxable income (or more if it’s untaxed) to spend just on themselves be counted among the needy? It’s a no brainer. I don’t think they need a Seniors Supplement, not compared to a woman I met last week through the Older Women’s Network in Sydney. Let’s call her Sophie. She’s also in her 60s but still shy of pension age. She’s single, she owns a small flat and last year she lost her job. Before she could even qualify for the unemployment benefit – the Newstart Allowance – that pays a below-poverty sum of $250 a week, she was required to run her savings down below $5,500 and wait 13 weeks for the payment.

It’s likely in the May budget that unemployed people like Sophie (a quarter of the people on Newstart  are over 50) will be hit with further obligations, and required to make more sacrifices. But the Seniors Supplement will be paid as usual to retirees who don’t really need it, some of whom admit as much. That’s just the start for seniors. Relatively high income older people with the million dollar holiday home or shares also qualify for heavily discounted $6 medicines that cost families on a low wage $36. As well there’s a seniors’ tax rebate. Are some of you getting angry with me? Do you think of yourselves as “self-funded” retirees who deserve a little something from the government? It’s too little understood that the tax concessions that enabled you (and me) to build our super nest egg are highly inequitable, giving big breaks to the well-off and little or nothing to the rest. COTA itself has pointed out the inequity of some current super tax concessions. There are also issues with the Age Pension. In 2006 as Australia was riding high on the mining boom, the government eased the pension asset test allowing a further 300,000 people to qualify. Couples can have an income up to $72,009 and a million dollars in assets in addition to their home and still get some Age Pension.

The Australian Council of Social Service points out in its budget submission that less than 20 per cent of people over 65 pay tax. That’s partly because many are on the full pension, scraping by on $20,000, or on very modest incomes. But an increasing number have rising incomes from employment, superannuation and investments. Is ACOSS picking on these seniors when it says: “Some of the most inequitable and wasteful programs and tax breaks particularly benefit relatively well-off older people…..”? It’s calling for many measures to make Australia fairer but included are abolition of the Seniors Supplement and a modest change to the pension asset test.

It’s a triumph Australia has dramatically reduced poverty among the elderly – no-one wants a return to the 1970s. But before seniors start the hue and cry that scares the pants off Labor and Coalition politicians, we should ask ourselves, “Is it fair?”

What are your thoughts? Please leave a Comment.

Coming of Age is updated every Monday. Click on ‘Subscribe for free’ if you want it emailed to you.

Retirees win but feel like losers

September 2, 2013
man on cruise ship

What I like about my distant relatives who live on the central coast of NSW is that they’re not whinging seniors. They admit that in retirement they have more money than they need. How many retirees, whatever their source of income, acknowledge they have enough? But that’s what the relatives said when we met for lunch. They’d become eligible for a part-age pension and the associated benefits, including cut-price pharmaceuticals, even though they had a good income from a state superannuation scheme. ”Really,” they said with some embarrassment, “we don’t need this money.”

My relatives’ good fortune is not due to a history of high-paid jobs and fancy investment strategies. He worked in TAFE for 30 years as a head teacher; she was mostly a home-maker. Yet they’ve managed, liked many middle-class Australians of their age, to attain a nice home, admittedly outside of Sydney, and to own a rental property, too. They live a comfortable life. Yes, it’s due mostly to hard work and frugality. But it’s also due to government policies favourable to retirees, such as easing eligibility for the pension, and to economic growth.

This federal election we’ve seen older Australians complain of being ignored, or criticising the offerings to them as inadequate. The older and younger generation have been pitted against each other over Tony Abbott’s paid parental leave policy. Many retirees complain they’ll be paying for the policy through its effects on dividend imputation; and Labor’s stirred the pot with advertisements featuring an angry pensioner critical of Abbott’s generosity to working mothers.

Retirees often feel hard done-by in the competition with families and the young for government largesse. But the evidence doesn’t stack up, I’m sorry to tell you. The latest research shows the position is exactly the opposite. Australians 65 and over have been big winners from state and federal spending and tax policies at the expense of the young. The shift was evident in 1984, but has accelerated since 2000. Australia has become a welfare state for the elderly, not the young as it was after World War 11. This is the conclusion of Alan Tapper and his colleagues at Curtin University. They’ve made an exhaustive analysis of the effects of government spending and taxes on household income between 1984 and 2010, using data from the Australian Bureau of Statistics. The result is a paper called Age Bias in the Australian Welfare State.

But wait, I hear, retirees cry: “We’re struggling with electricity bills and cost of living pressures.” A couple with children will say they’re hurting, too. Everyone (except my central coast relatives) will say they feel worse off. You need a more objective measure than “feelings” to assess the impact of policies on living standards. Some elderly people do struggle, and other research points to a rising incidence of relative poverty among pensioners till 2009. That’s when Labor increased the base pension rate and, in one fell swoop, halved poverty among the elderly. Wide disparities among retirees still exist, however. And Dr Tapper’s research is based on averages which tend to disguise these inequalities. Even so, he told me: “The elderly have done very well in the last decade, and they were already pretty well off. On average, public expenditure has treated them favourably compared to families with children, and that’s contrary to the common perception.”

The researchers took into account state and federal spending on pensions, health, education, and so on, as well as the impact of income tax and the GST to arrive at a “final income” for different age groups. The 65+ group, it turned out, has made big gains since 1984. Their “final income” was up $184 a week while for 25-34 year-olds, for example, it was down $109 a week. Even though retirees mostly are empty-nesters and home-owners, their “final income” was nearly as high as the average household’s who may face high housing and childcare costs and pay much more for medicines. The main boost to retirees’ income was through a huge increase in government spending on health, of disproportionate benefit to older people. As well, the 65+ group was paying less income tax in 2010 than the same age group in 1984; couples with dependent children, meanwhile, were paying 50 per cent more.

It’s usually the baby boom generation that’s criticised as greedy and spoilt by government “hand-outs.” Not so, according to Tapper’s analysis in this paper and an earlier one. It’s the boomers’ parents who’ve done best out of government. It started with the pro-family policies of the 1950s and ‘60s: couples with children paid virtually no income taxes, for example, and were helped into home ownership. And as this Inter-war group hit their senior years, governments shifted support from families to the elderly. Lucky them.

The 55-64 age group on the other hand, baby boomers by 2010, went backwards in “final income” over the 26-year survey, down $102 a week. A GFC effect? But despite most being losers, some boomers, I venture, have done nicely from superannuation tax concessions and negative gearing on investment properties.

In any case, as the wave of baby boomers moves into retirement, they’ll stand to gain from the largesse available to the elderly. “Does it make sense to give a lot of money to the elderly to the extent Australians governments do?” Tapper asks. Here’s another thought. There’ll be fewer workers in future to shoulder mounting health and care costs for an ageing population. Will politicians ask more of the elderly, will they be more generous to young families? Not likely, unless the swelling numbers of comfortably-off seniors acknowledge their good fortune, and leave the complaining to people in need.

What do you think? Are most older people comfortably off compared to families? Click Comment.

Coming of Age is updated every Monday. Click on ‘Subscribe for free’ to get it emailed to you.