With one in four age pensioners living in poverty, peak body National Seniors Australia has called upon the federal government to address the current inadequacy of the pension in next month's budget.
In a submission it suggests increasing Commonwealth Rent Assistance and providing an internet supplement or discount to help pensioners afford the cost of the internet which has become increasingly essential during the pandemic.
"Key pension supplements are not enough to meet the specific needs of those in poverty," says the submission. "While pension supplements exist to assist those who are less fortunate, they are not adequate. This has negative impacts on the capacity of older Australians to spend and stimulate the economy.
"While some retirees have savings, which they use to generate additional income, many don't. Compulsory superannuation only began in 1992, and its rate has taken many years to increase to its current setting of 9.5 per cent. For those in low-paid jobs, with broken career histories or in jobs where compulsory super has not applied this situation will be worse.
"Some retirees also do not own their own home. While many retirees have benefitted from rising property prices, for others this has undermined their ability to secure home ownership. This means more and more retirees will have to meet the ongoing cost of renting in the future to provide themselves with a home."
"There are more than four million Australian retirees heavily invested in the economy. Half of them are either fully or partially self-funded. They have a key role to play in the recovery, particularly as the group with highest levels of wealth and disposable income. They aren't looking for a hand-out, they are looking for leadership and an opportunity to help. To do this, they need confidence in the economy," says National Seniors Australia.
The submission also calls for a "fairer retirement system" and suggests removing means testing and considering a universal pension as exists in some other countries.
It says under a universal pension retirees would be rewarded for saving more. They would have no incentive to spend money or overinvest in housing simply to gain the pension, would not be penalised for working in retirement and not have to constantly deal with Centrelink or be concerned about reporting the value of their investments and income to meet means testing rules.
There are more than four million Australian retirees heavily invested in the economy. Half of them are either fully or partially self-funded. They have a key role to play in the recovery, particularly as the group with highest levels of wealth and disposable income. They aren't looking for a hand-out, they are looking for leadership and an opportunity to help. To do this, they need confidence in the economy.
"A universal pension would require government to enact tax reform to pay for the cost of providing a pension to all. This would ensure everyone received the benefit of a year-to-year safety net to meet income shortfalls in times of crisis and in later life when capital and income was reduced without creating a burden on the budget. Tax reform would allow government to recoup the cost of a universal pension from retirees with adequate income without negatively impacting low and middle-income households."
The submission also suggests reducing the rate of interest on the pension loans scheme which allows eligible retirees who own property to use their equity to generate additional income. The PLS provides access to up to 150% of the maximum age pension entitlement, paid fortnightly, with the loan repayable at any time, or on settlement of an estate. In January 2020 the PLS interest rate was lowered from 5.25 per cent to 4.5 per cent, but National Seniors says this is still too high and is a disincentive to people to take up the scheme.
The submission says the PLS would stimulate the economy by being used to top up existing income from the pension, investments and employment to provide a more comfortable lifestyle in retirement, meet income shortfalls during extraordinary events, such as the present financial crisis, fund health care services including dental costs and home care services, or assist family members in financial hardship.
Providing investment opportunities for older Australians is another way the submission suggests for making a fairer retirement system. It says the government should consider ways to allow retail investors to aggregate capital, such as being achieved through the affordable housing bond aggregator or the Pooled Superannuation Trust (PST) structure. Secondary markets in these products would assist to manage liquidity risks and enable individual investors to help fuel the recovery.
The government could also help older Australians by offering a simple way to invest in positive infrastructure projects that provide intergenerational, social and environmental benefits such as the Snowy Hydro 2.0.
The submission also suggests lowering the Assets Test Taper Rate, lowering the deeming rate and providing automatic revaluation of investments by Centrelink.
At present Centrelink automatically re-values market-linked managed investments, shares and securities twice a year on March 20 and September 20 to account for any changes in assets and income.
When Centrelink conducts a review, it bases its revaluation on information it receives at different times of the month, depending on the investment. Market-linked managed investment unit prices are collected at the end of month. Listed shares are collected fortnightly.
The automatic review that took place on March 20, 2020 would have used market-linked managed investment unit prices at the end of February. This was at the peak of the stock boom. It meant the calculation of a retiree's pension would not reflect market reality. For listed shares where Centrelink receives the figures fortnightly, the difference is likely to be less significant, although still not accurate given the large falls in the market during March.
"While pension recipients have the right to request a manual revaluation of their investments it is not practical for all pensioners to do this when markets fall dramatically. Not only does this create an undue burden on individuals and Centrelink, there is also the risk many do not know or are given misleading information from Centrelink about their right to have their assets revalued manually," says the submission.
National Seniors Australia also addresses aged care saying calling for a strengthening of home services care, support for construction of seniors' friendly housing and Increased funding and staffing transparency in residential care.