House of Representatives

Second Reading Speech

Mr Griffin (Minister for Veterans' Affairs)

I move:

That this bill be now read a second time.

This bill gives effect to the key elements of the government's secure and sustainable pension reform package in relation to veterans and their dependants.

The measures in this bill closely parallel for veterans and their dependants those reforms recently enacted in relation to certain social security pensions.

The variations reflect the differences between the social security and repatriation pension systems.

The pension reform package addresses the adequacy of income support pensions, makes the operations simpler and more responsive to pensioner needs and secures long-term sustainability.

It prepares Australia to meet future challenges, including the ageing population, through changes to social security, family assistance, veterans' affairs and aged-care legislation.

The reforms will provide significant increases in pensions and result in a simpler, fairer and more flexible pension system.

More than 320,000 Veterans' Affairs pensioners will benefit from these reforms, boosting their incomes by $1.1 billion over the next four years.

From 20 September 2009, the secure and sustainable pension reform package will increase pensions for all Veterans' Affairs income support recipients and war widows and widowers. The reforms will deliver increases of $32.50 per week for single service pensioners and $10.10 per week combined for couples on the maximum rate.

War widows and widowers will benefit from an increase of $30 per week.

Income support supplement recipients will also receive an increase in the supplement and the ceiling rate will be increased.

These increases are in addition to the regular indexation due in September.

A significant improvement will be made to the indexation of income support pensions, benchmarking them against a more realistic indicator of changes to the cost of living for pensioners.

The Pension Reform package introduces a new Pensioner and Beneficiary Living Cost Index recognising that the cost of living for pensioners and beneficiaries may increase faster than the cost of living for the general community as measured by the consumer price index.

From 20 September 2009, the maximum basic rate of income support pensions will be adjusted in line with either the consumer price index or the new pensioner and beneficiary living cost index, whichever is the higher.

Pension rates will also continue to be benchmarked to male total average weekly earnings.

From 20 March 2010, a new pension benchmark will be introduced for the maximum combined couple rate of pension. The benchmark will be 41.76 per cent of the annualised amount of male total average weekly earnings.

For a person being paid the single rate of pension, the relativity of that rate will be maintained at a rate of 66.33 per cent of the maximum rate payable to a couple.

Therefore, the new benchmark for the maximum single rate of pension will be 27.7 per cent of male total average weekly earning, an increase of more than 10 per cent from the current 25 per cent benchmark.

The current complex system of allowances and supplementary payments will be simplified and made more flexible with the introduction of a new pension supplement for service pension recipients.

Telephone allowance, pharmaceutical allowance, utilities allowance and the GST pension supplement will be consolidated into a single pension supplement for service pensioners.

From 1 July 2010, income support recipients will have the option of receiving around half of this payment quarterly.

This introduction of the new pension supplement arrangements will provide income certainty for veterans and their dependants while maintaining flexibility in managing their budgets.

War widows and income support supplement recipients will have the former allowances added to their base rate of pension.

Self-funded retirees of pension or qualifying age will also benefit from these pension reforms. A new seniors supplement for holders of a Commonwealth seniors health card or gold card holders over qualifying age will be introduced from 20 September 2009.

The seniors supplement will replace the existing seniors concession allowance and telephone allowance. In addition, all seniors supplement recipients will now be paid telephone allowance at the higher internet rate regardless of whether or not they were in receipt of the allowance.

The seniors supplement for a single person will be $785.20 per annum.

For couples, the combined payment will be $1,185.60 per annum.

Depending on what allowances they are currently in receipt of, all seniors supplement recipients will receive a net increase of up to $266.40 per annum for a single person and $148 per annum for couples. The seniors supplement will be paid quarterly.

The bill also establishes two new supplements to replace pharmaceutical and telephone allowances for those veterans, members and dependants who do not receive a Veterans' Affairs or social security income support payment.

The veterans supplement replaces pharmaceutical and telephone allowance under the Veterans' Entitlements Act. The MRCA supplement will replace pharmaceutical and telephone allowance under the Military Rehabilitation and Compensation Act.

These new supplements will commence on 20 September 2009.

A work bonus will be established to provide an incentive for those who wish to take up or continue to undertake paid work. The work bonus will apply to those veterans and dependants who are over qualifying age and will provide concessional treatment for their employment income. With the bonus, only 50 per cent of the first $500 a fortnight of employment income will be counted in the income test.

The work bonus will provide a real and timely incentive for those veterans and dependants who are able to continue in the paid workforce.

With the introduction of the work bonus, the existing pension bonus scheme will be closed to new entrants from 20 September 2009. The Harmer pension review found the scheme is not meeting its objective of encouraging workforce participation among older Australians. Existing members of the scheme will be able to remain in the scheme and claim a pension and their bonus when they finish working.

The reforms in the bill will also introduce greater flexibility to the pension advance arrangements from 1 July 2010.

The maximum advance amount will be increased for income support recipients and will link the maximum and minimum advance amounts to future movements in the service pension rate. More flexibility will be provided in the frequency of advances with up to three advances being available within a 12-month period.

This will better enable pensioners to manage large unforeseen costs.

To help ensure the pension system is sustainable into the future and targeting those most in need, the pension income test will be tightened.

From 20 September 2009, the pension income test taper rate will increase from 40 cents to 50 cents for each dollar of income over the income test free area.

In the case of a pensioner couple, their combined pension will reduce by 50 cents for each dollar of combined income over the income test free area.

Pensions paid to each partner will reduce by 25 cents for each dollar of combined income over the income test free area.

In addition, to bring the veterans' entitlements income test in line with other means tested payments, the additional income test 'free area' for dependent children will be removed.

As part of the reforms, new transitional payment arrangements are being introduced so that part-rate pensioners who would otherwise face a reduction in their payments as a consequence of the reforms will have their current payment rates maintained.

The transitional safety net will maintain indexation in line with increases in the consumer price index and will provide an increase of $10.10 per week for singles or couples combined.

The transitional rules will continue to apply until changes under the pension reforms result in a higher payment.

The pension age for persons other than veterans will increase in line with the increase introduced in the social security age pension age from 65 to 67 for both men and women.

These changes will be phased in gradually, commencing in 2017.

I want to make it abundantly clear that there will be no increase to the veteran pension age or to the age a veteran's partner can apply for partner service pension as a result of this legislation.

The bill will also make minor amendments to the social security and aged care pension reform measures so that the reforms operate as intended.

Finally, the bill will provide a vehicle for the Carbon Pollution Reduction Scheme increases to be payable to service pensioners, war widows and disability pensioners.

This government is acting to introduce much needed and long overdue reforms that significantly improve the adequacy of the pension and simplify and strengthen the nation's pension system.

These reforms will make for a more secure pension system, provide greater certainty to veterans and their dependants and ensure the system remains both adequate and sustainable.

Debate (on motion by Mr Lindsay ) adjourned.