Submission to the Review of Indexation Arrangements in Australian ...

Chapter 5 – The Interaction with Australian Government
Safety Net Benefits
Australia’s retirement income policy is designed to ensure that Australians have a
certain level of income available to them in their retirement years. Australia’s three
pillar retirement income system comprises:
• compulsory superannuation savings;
• voluntary superannuation and other private savings; and
• a publicly funded, means tested, Age Pension and associated social security
arrangements.
In retirement, members of the CSS and the PSS may receive retirement income from
each of the three pillars depending on their personal circumstances. Most people’s
income in retirement will be funded from a combination of superannuation, other
private savings and a full or part-rate Age Pension.
Superannuation and other savings enable individuals to achieve a higher standard of
living in retirement than the Age Pension alone.
Superannuation incomes received by retired members of the CSS and PSS can be
topped up by a full or part-rate Age Pension depending on individual circumstances.
The Age Pension is important for those retirees who were unable to save enough
through their working life, for people who had extended periods out of the workforce
or who had broken periods of employment.
Other Australian Government measures
A number of changes have been made to superannuation, taxation and taxpayer
funded Age Pension arrangements over the last 10 years. For example, pensioners
and self-funded retirees have benefited from bonus payments and new supplementary
payments. Part-rate pensioners have benefited from changes to the pension taper
rates.
There have also been taxation changes such as the Senior Australians Tax Offset and
those as a result of Better Super.
The Australian Government also provides support to older Australians through
subsidies and services for health and aged care. Services and concessions include the
Pharmaceutical Benefits Scheme and subsidised health care, through Medicare.
Interaction of superannuation pension and Age Pension
The level of retirement income payable from the CSS and PSS is broadly related to
the member’s personal contributions, period of eligible employment with the
Australian Government and salary at or near retirement. Any other income or assets
do not affect the total benefits payable to retiring members.
By contrast, the Age Pension is means-tested on both income and assets and does not
depend on previous labour force attachment or individual contributions.
Page 16 of 28