As a result of the global financial crisis, many self-funded retirees have been particularly affected by falling superannuation values.

Those Australian seniors who derive their income from account-based (superannuation) pensions have seen the value of their pension funds fall by forty or fifty per cent over the last six months. The rules around these pensions however require people to draw a minimum annual amount, determined by the previous year’s fund value as of July 30. Because fund values were at their peak in July 2008 and have since nearly halved, many self-funded retirees have been forced to keep drawing higher pension payments, effectively eating into their capital at an alarming rate.

On February 18, the Federal Government announced a 50% reduction in minimum drawdown limits for account-based and market-linked pensions for the remainder of the 2008/9 tax year. This should provide welcome relief for many self-funded retirees. 

As reported in the SMH, there has been mounting speculation in recent days that the Federal Government will reduce the pension of so called ‘wealthy pensioners’ in order to fund the $30 per week increase to single, full pensioners. These pensioners typically own their own home and have other additional sources of income. 

According to the report, a million part-pensioners stand to have their payments reduced to cover the cost of an increase in the pension paid to single, poorer retirees. This will be achieved by changing the taper rate, or income threshold, at which the age pension begins to decline.  Senior officials from the Department of Family and Community Services are believed to be in favour of amending the system to more effectively target pensioners in real need, particularly those in rented  accommodation with little or no assets.

The chief executive of National Seniors Australia, Michael O’Neill, said the first priority of the pension system needed to be “making sure the most vulnerable are looked after”.