Paul Fletcher (Bradfield, Liberal Party, Minister for Families and Social Services) Share this | Hansard source

I thank all members for their contributions to this debate, and I'm now pleased to sum up. Let me commence by tabling a replacement explanatory memorandum to correct a minor error. The Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 implements measures announced in the 2018-19 budget to enhance the living standards of older Australians. The bill provides for three changes to support Australians in retirement, including new means test rules to encourage the development and take-up of lifetime retirement income products, an expansion of the Pension Loans Scheme and an increase and expansion of the pension work bonus. All three changes will commence on 1 July 2019.

The new means test rules for pooled lifetime income streams pave the way for the development of retirement income products that support greater choice and flexibility for Australians in retirement. They apply to all pooled lifetime income products held by social security or veterans affairs income support recipients that are acquired or purchased on or after 1 July 2019. Products purchased before 1 July 2019 will not be affected by these new rules. The rules will not change for account based income streams—the most common retirement income product. Under the income test, the new means test rules will assess 60 per cent of payments from a pooled lifetime income stream as income. Under the assets test, the new means test rules will assess a proportion of the total purchase amount for the pooled lifetime income stream. At the time of purchase, 60 per cent of the purchase amount will be assessed. This will continue for a minimum of five years or until the person reaches the life expectancy of a 65-year-old male, currently the age of 84, whichever is longer. After this point, 30 per cent of the purchase amount will be assessed. In situations where an income stream is sold outside of superannuation, the new rules have some additional provisions to make sure that this is factored into the means test assessment. Stakeholders in the financial product and retirement income industries have been consulted throughout the development of the new means test rules, and the new rules take into account their feedback. The new means test rules are estimated to cost $20.2 million over four years.

Secondly, this bill increases the pension work bonus by $50 to $300 per fortnight and extends the application of the work bonus to income earned from self-employment. The work bonus is an income test concession for pensioners of age pension age and veterans affairs pensioners over qualifying age that encourages pensioners to undertake work to supplement their pension. The work bonus was set at $250 per fortnight when the current scheme was introduced in 2011 and has not been increased since. Increasing the work bonus amount to $300 a fortnight will allow pensioners to retain more of their pension when they receive income from work. Because the work bonus operates in addition to the standard pension income test free area, which is currently $172 per fortnight for a single pensioner, the increase in the work bonus to $300 a fortnight will allow, for example, a single age pensioner with no other income to earn up to $472 a fortnight from employment and still receive the maximum rate of age pension. The work bonus income bank limit will also increase to $7,800 under the changes. Pensioners will be able to build up any unused amount of the $300 fortnightly exemption to a total of $7,800. This amount can be used to exempt future earnings from the pension income test, so the changes will mean a pensioner could earn up to $7,800 a year extra without it affecting his or her pension. Extending the work bonus to the self-employed will improve the consistency and equity of the work bonus. It is fair that self-employed pensioners who earn income from engaging in work should be able to access the work bonus in the same manner as pensioners who are employees. Overall, the changes to the work bonus will increase the payments of about 88,750 social security pensioners and 1,000 allowance recipients from 1 July 2019. Approximately 1,150 people will become eligible for a social security pension for the first time. Approximately 3,000 veterans affairs pensioners will also benefit. The changes to the work bonus are estimated to cost $227.4 million over four years.

The bill also expands the Pension Loans Scheme. The Pension Loans Scheme is a voluntary reverse mortgage type loan available through Centrelink to part-rate pensioners and some self-funded retirees who own real estate in Australia. Under this scheme, a person of age pension age can nominate to receive an amount up to the equivalent of the full rate of the pension, with the payment accruing as a debt secured against real estate owned by the person. The debt accrues compound interest, with safeguards ensuring that the amount of the maximum loan that can accrue is limited. The expansion of the Pension Loans Scheme will mean that the available Pension Loans Scheme fortnightly loan plus pension amount will increase to 150 per cent of the maximum rate of fortnightly age pension, including the pension and energy supplements and rent assistance where applicable. This will allow, for the first time, maximum-rate pensioners with securable real estate in Australia to access the scheme. Current arrangements that prevent some self-funded retirees from participating in the scheme will be removed. The change will also allow existing Pension Loans Scheme recipients to increase their existing pension plus loan amount up to the new threshold of 150 per cent of the maximum fortnightly rate of pension. The changes will give older Australians more choice to draw on the equity in their homes to support their standard of living in retirement. Around 6,000 eligible pensioners of age pension age are expected to take up a loan under the expanded scheme over the next three years. The changes to the Pension Loans Scheme are estimated to cost $11 million over the forward estimates.

The bill also includes technical amendments to confirm that income support recipients of age pension age qualify for the employment nil rate period, which enables pensioners with work to remain connected to the pension system for a 12-week period, allowing them to retain their concession cards and immediately return to the pension if their work ceases.

Overall, this bill will give retirees greater choice and flexibility when it comes to managing their finances in retirement. It will support home-owning retirees to receive more income in the form of a loan, and it will allow older Australians to keep more of their pension when they work. In the best interests of senior Australians, I seek the support of the parliament for the passing of this bill. I commend the bill to the House.

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