Feb 02, 2023

More frequent pension adjustments needed to combat rising cost of living

More frequent pension adjustments needed to combat rising cost of living

Countries around the world are grappling with an increasing cost of living, putting many seniors under financial pressure. 

While Denmark has proposed a billion-dollar economic aid package to combat inflation, National Seniors Chief Advocate, Ian Henschke, has urged the Australian Government to update the Age Pension more frequently to better protect older people from the rising cost of living.

Denmark has proposed a 2.3 billion Danish Krone ($477 million AUD) inflation-aid package to soften the impact of their rising inflation rate, which peaked at a four-decade high of 10.1% last October.

The package would include a one-off $1,000 payment for older residents with a low income, while similar packages have previously featured caps on rental prices and electricity price reductions.

Australia, meanwhile, has experienced an unprecedented rise in the cost of living as inflation rates rose by more than 5% in 2022. 

The inflation rate now stands at a 30-year high of 7.8% and it is expected to hit 10% this year. The Reserve Bank of Australia (RBA) does not predict inflation to drop back to the target range of 2-3% until the end of 2024.

Interest rates, rent, food, petrol, gas and electricity prices have all skyrocketed in response and more bad news is on the way as this week it was revealed that Victorian gas users would be slugged with more than a 20% increase in tariff variable rates.

All States and Territories can expect their utility prices to rise, although not as drastically.

Mr Henschke said the Government needs to better protect people on the Age or Disability Pension by reevaluating the pension more frequently to keep up with periods of rapid inflation.

“National Seniors is urging the Government to look at adjusting the pension payment every three months during periods of high inflation because this is a way that people can cope better,” said Mr Henschke.

“But they’re doing the adjustments every six months and inflation is moving at a very rapid rate.

Mr Henschke said pensions can be updated every three months as they are based on the Pensioner and Beneficiary Living Cost Index (PBLCI) which is already updated quarterly. 

He recommended that pension payments should also be evaluated in June and December, when inflation is abnormally higher, so pensioners have adequate income when prices fluctuate.

For older people struggling to make ends meet due to high rents, Mr Henschke said he would like to see the Government invest in a Commonwealth rent assistance program.

If you have experienced the additional cost of living pressures, peak body for older Australians, the Council on the Ageing (COTA), wants to hear from people aged over 50 about the impact of rising costs on  their daily lives.

You can complete their confidential online survey here.

Pensioners should take advantage of concessions

Although Mr Henschke has urged the Government to step in and support pensioners, he said there are also a number of benefits and entitlements pensioners can access to ease the cost of living pressure.

“A lot of people don’t realise they’re eligible for concession cards, and this is a really important thing,” said Mr Henschke.

“In 2021 in NSW alone around 70,000 eligible self-funded retirees missed out on the $200 state government energy rebate simply because they didn’t apply. 

“One recent survey showed almost three-quarters of self-funded retirees did not apply for the concessions they are entitled to. 

“With inflation heading towards 10% it’s now more important than ever if you don’t have a pensioner concession card you need to find out what other concessions can help you as a self-funded retiree.”

As an example, the Commonwealth Seniors Health Card (CSHC) has new income thresholds of $90,000 for a single person (up from $61,284) and $144,000 for couples (up from $98,054). 

CSHC holders can access medicines for just $7.30 through the Pharmaceutical Benefits Scheme (PBS), while businesses and individual States and Territories also provide a number of concessions for eligible concession card holders.

Mr Henschke said any retirees looking for part-time work should take advantage of the increased cut-off point for fortnightly income.

Under interim changes to the Work Bonus, the first $300 of fortnightly income from work is not counted under the pension income test, meaning you could earn almost $12,000 per year before your pension is affected.

Meanwhile, he called on homeowners to consider accessing the Home Equity Access Scheme if times are tough.

“We have a system which is not very well known and not very well publicised, and that’s the Home Equity Access Scheme,” explained Mr Henschke.

“Older people that are struggling and own their own homes have the capacity to get up to 50% more than the cost of the pension deposited into their account fortnightly as a direct loan.

“It’s available to all people of the pension age, not just pensioners, with a low interest rate of 3.95%.

“So there are measures available to people if they are really struggling.”

You can use the National Seniors Concessions Calculator to learn what concessions you are eligible for.

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