OLDER WOMEN

The Government recognises the significant contributions made by Australia's older women, many of whom have devoted their energies to a range of family, caring, community and volunteer responsibilities.
Older women of today have had shorter workforce experience and are less likely to have superannuation or other savings to provide for retirement. Measures in this Budget will provide added security for age pensioners, the majority of whom are women. Through the Government's initiative on Retirement Savings Accounts, in future women will be able to accumulate additional financial resources for later life.
While recognising that many older women remain healthy and active, the Government is also committed to improvements in residential aged care.
There are several initiatives in the Budget which will assist older women.

Retirement Income

Deferred Pension Bonus Plan

The Government is delivering its election commitment to introduce a pension bonus scheme. The deferred pension bonus plan recognises that for some, active participation in paid work continues beyond retirement age.
This plan offers people of Age or Service Pension age a positive incentive to defer retirement. Under the plan a person who defers Age or Service Pension take-up while continuing to work for at least 25 hours per week will accrue a bonus of 9.4 per cent of his or her basic pension entitlement.
The bonus will accrue for each year of employment beyond Age or Service Pension age, up to a maximum of 5 years, when the bonus reaches 47 per cent of entitlement for each year of deferral. The starting date for bonus accrual will be 1 July 1998.
The bonus will be paid as a lump sum on pension take-up, and will be tax exempt. At current pension rates, the maximum bonus would be $21,251 for a single pension, and $35,450 for a couple, in receipt of the maximum rate of pension. This will be of particular importance to women who generally live longer than men, have broken patterns of employment and less chance of accruing retirement savings. Two examples of how the scheme would operate are set out below.
Example 1
Jean and Arthur are currently working. Arthur is eligible for the Age Pension from 3 July 1998. Arthur chooses to continue working (for a minimum of 25 hours per week) for the next five years. He applies for the Age Pension on 3 July 2003 and his assessed basic pension entitlement is $290.10 per fortnight (based on current rates). Arthur will receive a bonus payment of $17,725.10 with his first Age Pension payment.
Jean is not eligible for the Age Pension until 18 August 2000. She chooses to wait until Arthur retires before she applies for the Age Pension. Jean applies for her pension on 18 August 2003 and her assessed basic pension entitlement is $290.10 per fortnight (based on current rates). Jean will receive a bonus payment of $6,381.03 with her first Age Pension payment.
Arthur
$290.10 x 26 fortnights = $7,542.60
$7,542.60 x 9.4 per cent x 5 (47 per cent) = $3,545.02
$3,545.02 x 5 = $17,725.10
Jean
$290.10 x 26 fortnights = $7,542.60
$7,542.60 x 9.4 per cent x 3 (28.2 per cent) = $2,127.01
$2,127.01 x 3 = $6,381.03
Between them Arthur and Jean will have a tax free bonus payment of $24,106.13 when they choose to retire.
Example 2
Sharon qualifies for the Age Pension in the year the scheme commences. She is working in a shop where she has worked for some years, does not want to retire and is concerned to improve her retirement income. She defers claiming the pension until she has accrued a 5 year bonus. When she claims the pension a little over five years later, she is assessed as being entitled to the maximum basic rate, currently $347.80 per fortnight. The tax free bonus will be included with her first pension payment. The amount is calculated below.
Sharon
$347.80 x 26 fortnights = $9,042.80
$9,042.80 x 9.4 per cent x 5 (47 per cent) = $4,250.12
$4,250.12 x 5 = $21,250.58
Sharon will receive a bonus payment of $21,250.58 with her first Age Pension payment.
The bonus payments have been calculated using the current maximum rate for Age Pension and do not take into account any Consumer Price Index increases that may occur.


The deferred pension bonus plan will assist older people with the cost of larger purchases which are often important when a person commences retirement. The deferred pension bonus plan will be available to all persons who are eligible for a full or part pension who remain in the workforce beyond age pension age.

Reform of means testing for retirement income streams

Currently some people find the rules on means testing of income streams, which many retirees purchase to provide a regular income in their retirement, difficult to understand. This sometimes results in them making decisions which focus on gaining access to social security benefits rather than maximising their total retirement income.
The Government is introducing a standard set of rules for assessing income streams which will address this problem. The present arrangements for assessing income streams are complex and also contain loopholes through which some people are able to circumvent the means test. The new rules will make their income and asset treatment more simple, consistent and equitable. They also provide significant incentives for longer term income streams meeting specified criteria. The new, simpler arrangements will provide a clear choice between income streams which ensure an orderly draw down of capital and income over the entire retirement period, and income streams which offer shorter terms and greater access to capital. Special arrangements will exempt products which have already been purchased from the new approach where they involve contracts that cannot be broken or where people would face significant penalties by changing products.

Legislative Guarantee for Age Pension

The Government has demonstrated its commitment to an adequate Age Pension for those who need it by introducing legislation to maintain the single rate of pension at no less than 25 per cent of Male Total Average Weekly Earnings (MTAWE). The date of commencement of the legislation will be 20 September 1997. This will ensure that age pensioners share in increases in community living standards.
While the MTAWE benchmark has been a long standing bipartisan commitment, this is the first time that a Government has entrenched the MTAWE benchmark in legislation. It provides further evidence of the priority this Government places on ensuring the adequacy of pension payments. The measure provides added security for age pensioners, the majority of whom - 65 per cent - are women.

Aged Residential Care

Almost three in every four older Australians living in nursing homes or aged care hostels are women. The Government is concerned to provide older Australians with choices and opportunities for a better quality of life in their later, most vulnerable, years.
In the 1996-97 Budget the Government announced wide ranging reforms to residential aged care. The new reforms will: The new arrangements are expected to come into effect on 1 July 1997. Implementation details of the reform package have been worked out with industry and consumer groups. Stringent safeguards will protect those older Australians seeking to move to residential aged care facilities who cannot afford to pay an accommodation bond.
Over time the reforms will ensure a better quality of accommodation and more appropriate levels of care for older Australians are available.

Superannuation improvements and savings

Savings Rebate

The Government is strongly committed to encouraging household saving, and recognises that people, particularly women, want to save for life cycle needs such as education, health care, housing and consumer durables.
A major initiative of this Budget is the introduction of a broadly based savings rebate which will be available to resident individual taxpayers. The savings rebate will assist current savers and will be an encouragement to potential savers.
All taxpaying individuals who have some savings or investments or make undeducted superannuation contributions will benefit from the savings rebate. This rebate replaces the former Government's inequitable proposal to provide superannuation contributions to match 'compulsory' superannuation contributions by employees. The previous proposal would have provided no assistance to those who are already retired or are otherwise ineligible to contribute to superannuation, often women.

Preservation

This Government is also committed to helping people to achieve a higher standard of living in retirement than would be possible from the Age Pension alone. This Budget announces improvements to the superannuation preservation arrangements to ensure that benefits are used to provide income in retirement, and generally are not withdrawn from the superannuation system for other reasons.
Individuals will continue to be able to obtain early access to preserved benefits where the benefits are taken in the form of a non-commutable life pension or lifetime annuity on termination of gainful employment (subject to the terms of superannuation fund trust deeds).

Choice and Flexibility

The Government also believes that women should have more choice as to where their superannuation benefits are invested. Hence, from 1 July 1998, employees will be given a greater choice as to which fund will receive compulsory employer superannuation contributions made on their behalf. The arrangements will not override negotiated provisions contained in workplace agreements, and will not apply to employees working under State industrial awards, for constitutional reasons.
To improve the flexibility of superannuation arrangements for low income employees, from 1 July 1998, people earning from $450 to $900 per month from an employer will be allowed, with the employer's agreement, to choose to receive as wages or salary the employer Superannuation Guarantee (SG) contributions. Employees will only be able to opt out to the extent that SG contributions exceed relevant award obligations.
These measures will benefit women by ensuring that superannuation is made more flexible, reflecting people's actual social and work experiences.
These reforms complement several measures announced in the 1996-97 Budget, which come into effect from 1 July 1997, and include: