Tougher pension rules are likely to be pushed beyond the next election as Tony Abbott vows to keep his campaign promise not to change pensions, but to get the budget under control.
However, The Australian understands the sustainability of the pension remains an “active’’ discussion in the government’s expenditure review committee this week and that no final decision has been taken on any changes to income or assets tests.
Amid growing backbench concern over the political impact of speculation about pension changes, the Prime Minister yesterday was emphatic that the government would keep its pre-election commitments but also show a path back to a sustainable surplus.
“If there is one lesson to be learned from the political quagmire that the former government got itself into, it is: keep your commitments. So we will keep them,’’ Mr Abbott said.
“But one of the most fundamental commitments of all was to get the budget back under control, to put the budget back on to a path to a sustainable surplus.
“So we’ll be doing that but, as for pensions and pensioners, I am confident that pensioners will be better off because under this government they will lose the carbon tax, but keep the compensation.’’
The tension between keeping election commitments and reining in the budget deficit comes as senior ministers believe the government must cut hard in this budget as it will be its only chance to make substantial changes.
Mr Abbott said the government would “do the right thing by the people of Australia and that certainly means looking after the vulnerable, but it does also mean getting the budget back on a path to a sustainable surplus’’.
The Prime Minister’s comments came after Joe Hockey last weekend put pension reform on the agenda when he said the retirement age might have to rise to 70, over time, and called for a debate about the sustainability of the pension.
The Treasurer questioned the indexation rate for pensions and invited a discussion on the assets test. The Financial Services Council, which represents private superannuation funds, seized on Mr Hockey’s call for a rise in the pension age to argue for the superannuation access age to be lifted from 60 to 65 over time.
The council’s chief executive John Brogden said it was “no longer viable’’ to have a seven-year gap between being able to access superannuation and the age at which people could access the age pension.
He said lifting the age at which superannuation could be accessed would lift the proportion of older workers in the workforce and would increase the amount of funds people had in superannuation as they would work for a further five years. The FSC also called for a tightening of eligibility to the age pension and linking the age of retirement to life expectancy through a formal process guided by the government actuary.
It cited government research showing that despite the increase in the pension age to 67 by 2023-24, the number of people eligible to receive the age pension would rise by about 150 per cent by 2049-50.
Increasing superannuation wealth would reduce the impact on the budget but would not stop a rise in the number of people receiving part pensions.
The 2010 intergenerational report projected that the proportion of retirees receiving a full pension would remain steady at about 20 per cent but the proportion of retirees who received a part pension would increase from 30 per cent to nearly 50 per cent.