Macklin defends ALP pension reforms

There are some serious inaccuracies in your recent article Pensions – tax by stealth published online on August 10, 2010.

Last year the federal Labor government delivered major pension reforms that have now helped deliver an increase of around $100 a fortnight to single pensioners and $74 a fortnight to couples. These were the biggest reforms to the pension in 100 years. Our reforms aimed to deliver a stronger and fairer pension system to provide security and sustainability into the future.

The claim that the couples' pension has been 'slashed' is wrong. The pension reforms increased the amount paid to both couples and singles. A greater increase has been paid to singles because the Harmer Review of Pensions found that the single pension rate was especially inadequate and the priority for reform. The 2009 pension reforms increased the relativity between singles and couples from 60 per cent to 66 per cent. This change in no way offset the cost of the pension reforms.

The article suggests restoring the traditional 167 per cent relationship between couples and single pensioners. If this happened, there would be a cut to the single pension by almost $70 a fortnight.

The claim that a large number of people have received no additional pension is wrong. Existing pensioners receiving a transitional rate, that ensured they were not disadvantaged by changes made to the income test, also received an increased pension rate under the pension reforms in addition to indexation. All 3.3 million pensioners received an increased payment on September 20, 2009.

The article takes issue with the Australian government's adjustments to deeming rates in line with economic shifts. But current deeming rates are lower now than when the Howard government left office. Deeming rates were cut three times during the financial crisis – the lower rate from four to two per cent, and the upper rate from six to three per cent.

The claim that pensioners earning more than $125 a week are effectively taxed at 50 per cent is wrong. The combined impact of the existing Work Bonus and income test free area means a single pensioner with no other income can earn up to $292 a fortnight and a couple with no other income can earn around $500 a fortnight combined without any impact on their pension.

The pension system was a ticking time bomb after 12 years of inaction from the former Coalition government. Without our $14.2 billion reforms, Australia's pension system would not provide adequate support to Australia's ageing population into the future.

Australian taxpayers do not begrudge this investment. Australians know that pensioners, especially those on the single rate, have been doing it tough. But the public rightly expect reforms to be economically responsible as well as compassionate.

Many age pensioners take on part time and occasional work and should be encouraged and rewarded for these valuable contributions to our community.

A re-elected Gillard Labor government will introduce a new, more generous Work Bonus for age pensioners from 1 July 2011. The new Work Bonus will allow a pensioner to earn up to $6,500 at any time during the year without it affecting their pension.

Jenny Macklin is Minister for Families, Housing, Community Services and Indigenous Affairs