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"Better incomes: retirements income policy into the next century".



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"BETTER INCOMES: RETIREMENT INCOME POLICY INTO THE NEXT CENTURY".

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

STATEMENT BY THE HON BRIAN HOWE MP MINISTER FOR SOCIAL SECURITY, MINISTER ASSISTING THE PRIME MINISTER FOR SOCIAL JUSTICE

This statement is the first comprehensive policy on retirement income in Australia's history.

It has been developed through wide and extensive consultations with all interested groups.

The issues are well known and the solutions are generally agreed even though there may be some differences about details.

In this statement we step beyond the short term to a policy about the long term future of Australia and our retired people.

This Government's Retirement Income Policy is built on the firm foundation of Social Security, Taxation, and wages policy over the last 6 years. ~

Without the reconstruction of the Social Security and Taxation systems of the last 6 years it would not have been possible to develop or adopt a policy that is fair, adequate, secure and sustainable.

In tandem with the Government's economic strategy this policy addresses, in a fundamental way, the level of national savings. Saving for retirement is long term and not directed to short term consumption. It helps ensure sustained economic growth and reduces our dependence on overseas borrowing.

This retirement income policy is a policy to deliver better incomes for those retired now and those who will retire in the future.

It is a fair, adequate, secure and sustainable policy.

It is a policy about better incomes now and into the next century.

Madam Speaker, retirement issues affect everyone, one way or another, throughout their lives.

The policy is fair to everyone.

It is fair to people currently retired. For people dependent on the age pension it provides a real sustainable increase in incomes.

The Government is committed to the age pension system. For the first time it will be integrated with private retirement savings.

The interaction of private savings particularly through superannuation, pensions and tax will be reformed in 3 steps.

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First, by 1990 the pension income test free area will be 100% tax free.

Second, from 1991 the Social Security - and tax - income free areas will be indexed.

And third, from 1995 the tax and social security systems will be better integrated - so no age or service pensioner - full rate or part rate - will pay income tax.

At that time the present withdrawal rates will be substantially reduced to 50 per cent.

This policy statement also marks an historic new fair deal for women in retirement income.

Changes in the superannuation system will mean that, for the first time ever, women who have time out of the workforce or who work part time will have access to superannuation.

Wages policy and superannuation policy will mean that the number of women covered by superannuation will rapidly increase.

This Government established award based superannuation as part of wages policy.

It is through award based superannuation that most women will get the opportunity to benefit from superannuation.

Award based superannuation is the best and fairest means of providing superannuation to the majority of the workforce. The Government supports the principle of the extension of award based superannuation.

Superannuation changes will mean that in the future widows will be entitled to far better reversionary benefits on the death of their husbands. Over time retiring couples are far more likely to take an annuity with the security of an adequate

reversionary benefit for the widow when her husband dies.

Couples will have the opportunity to make sure that women are not left widowed without adequate income.

The policy is also fair to the many thousands of women widowed before they could benefit from these changes. It enables these women to use the equity in their homes to supplement their income without affecting their pension - and provides

substantial increases for those who do not own their home but pay private rent.

The government rejects the argument that fairness requires a decision to lift the age pension age for women.

We will monitor the progress of women's access to superannuation and the labour market before consideration of any change to the age pension age for women.

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Our retirement income policy is all about better incomes - better incomes for all in retirement.

This policy statement reaffirms our firm commitment to the age pension system and to tax assisted superannuation.

In April 1990 we will not only meet, but exceed Labor's long standing commitment to an age pension of 25% of average weekly earnings.

We will maintain the value of the pension through indexation in line with the Consumer Price Index - at the earliest possible date after publication of CPI figures - and we commit ourselves to further increases in the age pension, over time.

Income needs of people who have not had the opportunity to save during their working lives will be met under this policy. Adequate retirement income is much broader than an adequate pension.

On top of the age pension, rent assistance reforms mean that over just 10 months - from December 1989 to September 1990 - we will double rent assistance from age and service pensioners - from $15 to $30 per week.

For the first time ever rent assistance will be indexed.

This policy also contains a package of measures that will make annuities a far more attractive option for people as they retire.

The package includes changes in the superannuation system to reasonable benefit rules, lifting the maximum level of reversionary benefits for widows and freeing up arrangements for smaller funds to provide annuities. In the social security system the bias against annuities in the income test will be removed.

This policy means that superannuation and other savings can now be used effectively as a source of retirement income - lifting the levels of retirement income.

Madam Speaker, retirement income is not a short term matter. Young people starting off on forty years of a working life need to be able to save for their retirement with security.

This statement includes a program for changes well into the next century. For the first time ever Australia's workers can plan for retirement on a secure footing.

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That secure footing includes the guarantee of indexation of every component of the age pension system.

The basic pension is indexed.

Assets test limits are indexed.

After the substantial increases in rates, rent assistance will be indexed from March 1991.

From 1991 the tax free income test free area will be indexed.

All child payments are automatically adjusted for inflation.

People who have retired and those who will retire in the future now have the security of knowing that inflation will not erode the adequacy of any part of the age pension system.

Retired people also need access to reliable information about social security and tax rules.

This policy includes provision for advisory and information services so that retired people can have the security of access to reliable information about how best to manage their retirement income.

Most importantly this policy is sustainable.

Like every element of the government's social policies, the retirement income changes in this statement will be fully funded on introduction.

The changes mean that as time goes by more and more people will retire with better access to superannuation and other private income.

Because we have reconstructed the social security system over the last 6 years and because we have built a fair superannuation system we can now integrate private retirement savings, the public pension and the tax system. Through these

steps as a community we will be able to provide better incomes in retirement into the next century, for all Australians.