Pension rise, but seniors still playing catch-up

Inflation triggers bigger than usual pension rise but are you really better off?

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Pensioners to receive indexed increase as inflation skyrockets. Image: Shutterstock

Pensioners to receive indexed increase as inflation skyrockets. Image: Shutterstock

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Pensioners will receive a boost to their welfare payment from Sunday, March 20.

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Single age pensioners will receive a welcome $20 p/f boost to their welfare payment from March 20 (couples $30.20 combined)): one of the biggest indexed rises in almost eight years.

The rise is based on how much the cost of living has escalated over the past six months and will increase the payment for singles to $987.60 and for couples to $1488.80 including pension and energy supplements - an increase of 2.1 per cent.

Disability Support Pension and Carer Payment rates will increase by the same amount.

But does that really mean pensioners are now better off?

Not according to one advocacy organisation, because the indexed rise covers how much the cost of living has gone up in the past six months, which pensioners have been paying for all that time. The next indexed rise will be in September and as economists are predicting, and no doubt the supermarket cash registers will prove, inflation is likely to further skyrocket over the coming months. However, welfare recipients won't get further indexed financial relief for another six months - their payments always lag behind what it actually costs to live from fortnight to fortnight.

The latest increase simply puts pensioners back to the same point they were on September 20 last year minus all the extra money they've had to pay out to counter inflation for six months.

And, as many older Australians live pension payment to pension payment, any daily, weekly or monthly cost of living rise puts them under increased financial pressure meaning something has to be cut from the budget such as food, medication or heating/cooling.

As the cost of petrol also goes through the roof, many people - especially those living in regional area who have to travel distances for shopping or medical services - are going to find the cost of running a vehicle more prohibitive.

Pensions and allowances are adjusted twice yearly and are linked to the higher end of either the Consumer Price Index or the Pensioner and Beneficiary Living Cost Index and benchmarked against the Male Total Average Weekly Earnings.

The last increase in September saw pensions rise by $14.80 for singles and $22.40 for couples combined.

In advance not arrears

Paul Versteege from Combined Pensioners and Superannuants Association would like to see the pension indexed in advance not in arrears.

"Indexation increases the pension after prices have risen steeply. Unless you have additional income or savings to cover the shortfall, you can be struggling during the six months before the pension goes up. If the following six months also sees high inflation, the struggle continues," he said.

"To an extent, the rate of inflation can be predicted, and that is why the pension should be indexed in advance, not in arrears."

National Seniors Australia while welcoming the pension rise believes there are many other reforms which are required to ensure the retirement income system is simpler and fairer.

Among the reforms is an Independent Pension Tribunal which would set the rate for the pension and pension supplements to stop it becoming a political football.

An Independent Tribunal would review and set the rates based on need to ensure pensioners facing cost of living pressure are not left behind.

According to National Seniors Australia Chief Advocate Ian Henschke, there is a desperate need to particularly focus on Commonwealth Rent Assistance. "Renters are the most likely to be living in pension poverty," he said.

National Seniors is also calling for the government to exempt work income from the income test which it says unfairly punishes low-wealth pensioners who need to work to boost their income and savings.

The latest pension rise announcement also increased the asset test limits which will allow more senior Australians to access a part pension.

For example, the asset limit for a single homeowner has been boosted by $6750 to $599,750 and for a homeowner couple by $10,000 to $901,500. (A prime place of residence is not classed as an asset).

The pension will be begin to reduce when assets reach: single homeowner $270,500 (couple $405,000), non homeowner $487,000 (couple $621,500). Couple separated due to illness, combined and couple, one partner eligible, combined ($405,000 homeowner and $621,500 non homeowner).

Jobseeker Payment will increase by $13.20 to $629.50 for singles without children while Parenting Payment Single will increase by $18.10 to $874.10 including Pension Supplement and Energy Supplement.

The payment increases were announced by Families and Social Services Minister Anne Ruston who said indexation was an integral part of the social security safety net and ensured pensioners and jobseekers maintained their purchasing power within the economy.

"This is putting money in the pockets of all Australians who rely on our social security system and, in particular, older Australians," she said.

The fortnightly maximum rate of Rent Assistance will also increase by $3 to $145.80 for single recipients with no children, $2.80 for couple no children to $137.40.

More than five million welfare recipients will receive the increases.

Full details of new rates and thresholds are available here

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