Actuarial consultancy, Rice Warner is urging the Government not to tinker with the age pension indexation settings but, rather, to tighten the pension means test.
In an analysis published this month following the release of the Treasury’s latest Intergenerational Report, Rice Warner principal, Michael Rice pointed to the increased need for superannuation funds to educate their members about the need to have an adequate retirement income plan.
However on the issue of the Government’s approach to the age pension, Rice wrote that his company believed it would be better to tighten the means test rather than alter indexation.
“This would reduce benefits for better off pensioners whereas changes to indexation would hurt the poorer retirees the most,” he said.
“Indexation to CPI will preserve the purchasing value of current pensioners, but new pensioners in future years will receive benefits that are progressively lower than their income and expenditure requirements immediately prior to retirement.”
“If indexation were to be changed, we would, at a minimum, maintain the floor of 25 per cent of Male Total Average Weekly Earnings (MTAWE) which was legislated by the Howard government,” Rice wrote. “After the initial 13 per cent reduction in pensions (from 28.7 per cent to 25 per cent of MTAWE), future pensioners would still enjoy some benefit from the future growth in the economy.”
