Super slide drives retirees to pension

DWINDLING super returns are forcing thousands of self-funded retirees on to the aged pension

Broken piggy bank

Super slide drives retirees to pension

DWINDLING super returns are forcing thousands of self-funded retirees on to the aged pension.

The taxpayer bail-out of retirees who can no longer fully fund their own retirements has ballooned.

The number of Australians seeking the aged pension jumped by nearly 40 per cent last financial year.

It is the most alarming sign yet of the looming cost of an ageing population.

The Federal Government says the leap in pension applications from 130,000 to 180,000 is a combination of an ageing population and asset test changes that make it easier to get the pensions.

But there is evidence the dramatic surge also has been fuelled by the market slump which has carved an estimated 20 per cent from the average savings of self-funded retirees since August last year.

The Queensland Association of Independent Retirees says the losses have pushed many couples well below the critical $804,000 in assessable financial assets which allows pensions to cut in.

Association president Helen Sava said the sharemarket collapse had created a largely unreported financial crisis for seniors and many feared they would never regain financial security.

Mrs Sava confirmed the shift from self-funded retirement to part or full pensions, reporting that about 10 per cent of her branch of about 300 had to move to pensions to survive.

"Many of these losses are up around 25 to 30 per cent,'' she said. "And people over 65 don't have the luxury of time.''

As an example, a retired couple who in 2007 owned their home and had $850,000 in superannuation and $40,000 in other assets were not eligible for the pension. But now, with their super reserve cut to $680,000, they would be eligible for a part pension of $204.65 a fortnight -- about $10,500 a year.

The Federal Department of Community Services confirmed the number of new  "customers'' rose from 130,000 to 180,000 between 2006-07 and 2007-08.

"Much of the inflow of new customers in 2007-08 could be attributable to the halving of the assets test change from 20 September, 2007,'' a spokesman said.

Financial adviser Noel Whittaker urged self-funded retirees affected by the downturn to seek financial advice on whether they could get a top-up from the aged pension.

Shadow assistant treasurer Michael Keenan said the erosion of self-funded retirees' capital was a flow-on effect of the Government "talking down the economy''.

Treasurer Wayne Swan said the Government understood that many Australians on low and fixed incomes were having a tough time.

"That's why we boosted spending on aged pensioners by $6.6 billion in the Budget, paying the $500 seniors' bonus and lifting the utilities payment from $108 to $500,'' he said.