Australia’s pension fund faces ‘major challenge’
The Commonwealth of Australia has warned that it may have to cut off its pension plan for the first time in decades to cope with the impact of a global financial crisis and pension payments under the Coalition government’s controversial plans.
Key points:The government announced it would end the pensions of more than 5.3 million workers last yearThe government has said it would raise more than $12 billion over four years to pay for the cost of the plan, which would be funded by a reduction in the GST, the National Disability Insurance Scheme and a reduction to the age pension entitlements of older Australians.
The Government announced in September that it would be ending the pensions for more than 50 per cent of Australians by 2033, and the cost for workers to continue to receive the pension is estimated to be about $11,000 per year.
“We have to make sure that we are protecting taxpayers,” Treasurer Scott Morrison said on Monday.
“And we will, in the short term, reduce the pension plan.”
“And that’s a big challenge for the Commonwealth, it’s a huge challenge for taxpayers, it will be a big problem for workers.”
The Coalition’s proposal to end the pension for those aged 55 and over was rejected by Labor and crossbenchers last year.
However, Mr Morrison has now said the Government will “take a step forward” on the issue and said it could save the government millions.
“It’s a very big challenge to have an old-age pension plan that’s only sustainable for 50 per-cent of the population and we have to be very careful in what we do, as the Treasurer said, about what we say, and what we don’t say,” he said.
“I think we can make some savings.”‘
A great opportunity’The announcement comes after the Government was criticised for raising the price of its pension plans for the most vulnerable people, including people with disabilities.
In a submission to the inquiry, the Australian Council of Social Service (ACOSS) said the plans were “too costly to sustain”.
“The cost of an old age pension is now more than double that of the Commonwealth’s Medicare, and its value has fallen by more than 30 per cent over the past 15 years,” it said.’
Unfair’The report also questioned whether the Government had taken a “great opportunity” by ending the plans, which are not funded through taxes, but are set to cost $12.6 billion over the next four years.
“What has the Commonwealth done to ensure that its plan will continue to be affordable and affordable to the poorest in society?” it said in the submission.
The government’s proposal would cost $9.7 billion over a four-year period.’
Great opportunity’But Treasurer Scott Moore, who took over from Joe Hockey as the nation’s top job in September, said the plan was “in the public interest”.
“We are taking a step forwards, we’re going to be making changes that are fair to workers and to taxpayers and we’re making changes to the plan that is sustainable for the long-term future,” he told the ABC’s AM program on Monday night.
“That’s a great opportunity for us to be successful.”
Mr Morrison said the pension plans were not funded by taxes.
“They’re not a revenue generator, they’re not funded from taxes,” he argued.
“So we have a responsibility to ensure we are providing the resources that we can afford to give to our workforce and to ensure it’s not a burden to taxpayers.”‘
Pension crisis’The Government’s plan to end pensions was opposed by Labor, who argued that ending the plan would result in workers “trying to take away their entitlements” and leave the pension system vulnerable to further tax cuts.
“The Government has now put in place an unprecedented plan to leave the public pension system in crisis,” said Labor’s finance spokesman, Matt Keating.
“If this Government is serious about helping the most people, it should not be making cuts to the public service that are already under strain.”
The Greens also criticised the Government, calling the plan “unfair”.
“This Government has just made the pension crisis worse for the people who need it most,” said Greens senator Penny Wong.
“With the public’s support and with their help, we have the numbers to ensure a pension is affordable for everyone.”