Expected impact of age pension cuts on care providers

Aged care providers are being called upon to monitor the impact of changes to the pension assets test on clients’ ability to pay for services.

Experts believe the new formula for determining the age pension payment, which came into effect on 1 January, is likely to impact people’s ability to pay for their aged care within the decade but some people will struggle immediately.

David Whiteley, CEO of Industry Super Australia has told Inside Ageing that Rice Warner modelling shows by 2055 more than 40 per cent of retired Australians will be adversely affected – particularly women.

“These changes squarely hit mid to low income people. For most Australians, it means working longer, retiring with less or saving more,” he said.

“Single women currently aged between 55 and 59 on incomes as low as $46,000, will now receive $41,000 less from the age pension over their retirement but other people will be impacted sooner.”

“Existing retirees with simple investments on the thresholds of the new asset limits may struggle,” he said.

“Low interest rates could see people with modest savings, ironically, living off less than the full age pension.”

Overall, the changes will see $2.4 billion stripped from the pension. It is thought that approximately 327,000 pensions will be immediately impacted.

Mr Whiteley said that under the old settings, 50 per cent of single women would not have attained a comfortable retirement by 2055 – that figure now jumps to 80 per cent. For single men it was 49 per cent, now 70 per cent.

“This current crop of retirees hasn’t had the benefit of superannuation over their full working lives,” he said.

“Also, women who were paid less, had interrupted work histories or went through divorce have limited super.”

In 2013-14 the average at-retirement super balance was $322,000 for men and $180,000 for women. The median figures were even more startling – for men aged 55 to 64 it was $150,000 and for women $80,000.

“We can’t say yet what the pension changes, combined with funding cuts, will mean for the sector,” Mr Whiteley said.

“Older Australians will tell you that they put money aside for rainy day events such as health emergencies and aged care. However, vulnerable people cannot be allowed to fall through the cracks.”

“Strong safety nets must remain in place, and MPs need to be told if people are struggling.”


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