It happened in Australia

[spncity]

So I guess it can happen in Australia. I'm guessing this is like their social security??

Pensioners get first reduced payments amid anger over politicians' entitlements

Excerpts

"The family home remains exempted from the assets test and the changes have been designed so that they only impact pensioners with significant assets outside the family home."

Single homeowners can have $250,000 in assets, not including their home, before their pension rate is reduced, while homeowner couples can own up to $375,000 in assets before their pension rate is cut.

After that threshold is reached, pensioners will lose $3 for every $1000 they own over the limit, up from $1.50.

... about 236,000 pensioners lose part of their payments, and another 91,000 lose their pension entirely.

Ran across this when I happened to read an entirely different article: Lest we forget Michael Chamberlain, a decent man cruelly wronged

and

Michael Chamberlain, pastor, academic and author who continually fought for justice

 

[daylatedollarshort]

If that happened in the U.S. I guess we'd be spending more time on this forum discussing upsizing instead of downsizing our retirement homes.

 

[Hermit]

Never say "Never" 'cause ya never know....

 

[6miths]

Ouch. I wonder whether the Australian pension plan is paid out of current tax revenues or a specific plan which is underfunded or in trouble.

 

[LOL!]

So, have you forgotten how SS benefits came to be taxed?

 

[growing_older]

Ouch. I wonder whether the Australian pension plan is paid out of current tax revenues or a specific plan which is underfunded or in trouble.

"When you are faced with an ageing population, let's not forget the pensions that are paid out today are paid for by today's taxpayers – the people who are paying taxes today," he said.

 

[NW-Bound]

Australian pension is more like a welfare system that pays a maximum of $797.90 biweekly (a fortnight) to a single retiree, or $1,203/fortnight to a couple if they have no other income and low assets. It is means and income tested.

The pay is phased out if a single retiree has assets of more than $250K outside of his home, or other incomes of more than $164/fortnight.

Income phase-out rate is 50c reduced for each $1 of other income above $164/fortnight for a single person, and $292/fortnight for a couple.

The article that OP quoted talked about the asset-based phase-out schedule being accelerated from $1.50 reduction per $1000 worth of assets to $3 benefit reduction per $1000.

About 35% of Australian retirees never received any of this pension because they already earned or owned too much.

See: https://www.canstar.com.au/superannuation/how-does-the-australian-age-pension-work/

 

[Viking]

Hey, someone's got to pay for those corporate tax cuts.

 

[NW-Bound]

I should add some info in addition to the post I made above. That is SS in Australia is not as bad as some might think, and in fact better than our SS. Their system has been privatized, and workers actually have their own accounts, something like a portable 401k that they take from job to job. It is called "Superannuation". Each person has his own "lock box" like our 401k and 403b accounts, and the money does not go into a common box like our SS and pensions.

Contributions from employees and employers are compulsory, just like our SS. However, the money in a worker account is really his to draw after retirement, not "shared" with other people. Contributions are before tax, and withdrawals are tax free.

People who are not able to save much for whatever reasons still get the means/income-tested pension as described above, which is more generous than the US SSI for the indigent.

See: https://en.wikipedia.org/wiki/Superannuation_in_Australia.

 

[nun]

In the UK the earnings related component of their version of SS has been abolished. So now no matter how much you make people with the same number of years of contributions get exactly the same SS check. Its a big cut for high and middle income earners and even the poor won't see much increase as their payments were often subsidized by things like housing benefit which are now cut......because of the higher base pension. However, it's a substantial increase in my UK SS as my voluntary contributions would have only entitled me to the lowest possible payment before the new rules and now I will get 50% more.

It's a certainty that SS and Medicare will be looked at by the new administration along with tax and healthcare......and I don't expect that those benefits to change in the same direction as my UK SS. US at the federal level might look a bit like KS under Brownback in a few years.

 

[2017ish]

No one has an unassailable legal right to social security, per Flemming v. Nestor, 363 U.S. 603 (1960). DW and I are starting to consider the possibility that "we" (aka grandchildren) might get something from it, but continue our 30+ year assumption that it will get means tested away from us.

And, yes, Australia (like Chile) has a very different system than USA...

 

[6miths]

In the UK the earnings related component of their version of SS has been abolished. So now no matter how much you make people with the same number of years of contributions get exactly the same SS check. This has resulted in a substantial increase in my UK SS as my voluntary contributions would have only entitled me to the lowest possible payment before the new rules and now I will get 50% more.

Yes this is the same as the system in Canada. CPP is not funded out of current revenues and at last accounting was in quite reasonable shape. It is a true pension programme funded by employee/employer contributions to a protected plan. There are other programmes which are funded from current revenue and are subject to clawbacks at various income levels - OAS (Old Age Security) at a fairly high income level until it is totally clawed back at somewhere around 120k and and GIS Guaranteed Income Supplement) which is really only meant to supplement very low income people. The current debate in Canada is two fold - one is to make contribution rates higher to allow for higher individual pension amounts and the second is to roll back the age at which the pension can be taken due to greater longevity.

 

[nun]

The current debate in Canada is two fold - one is to make contribution rates higher to allow for higher individual pension amounts and the second is to role back the age at which the pension can be taken due to greater longevity.

The UK has a rolling increase in SS age. Someone born today will get it at age 68, I'm 55 and qualify at age 67, while my father qualified at 65.

The UK state pension is funded like US SS ie from government revenues. Additionally, all full time wage earners must have access to a workplace pension plan and enrollment is the default and employer contributions are mandated, however the employee has the option to opt out. If a company is small it can use a government sponsored DC pension called NEST (National Employees Savings Trust).

But the best way to save in the UK is the Individual Savings Account (ISA) which is like a ROTH but you can get at the money without penalty at any time and for anything. Its just a tax free investment account with no strings and you can put £20k/ year of after tax money into it and never pay any tax on the gains. In the UK the first £11k capital gains are tax free and the first £5k of dividends are also tax free.

 

[6miths]

Ah then I stand corrected. CPP is standalone and separate from any employer pension though private pension plans may account for CPP income and be reduced accordingly at age 65. Individuals in Canada have two tax advantaged savings plans available - 1) RRSP which is like a 401k but is held by the individual and not linked to an employer (pretax money, tax deferred growth, taxed on withdrawal as income at whatever age withdrawn with RMDs starting at age 71) and is totally self-directed and 2) the TFSA which is after-tax money but growth is tax free and not counted as income or taxed upon withdrawal.

 

[DrRoy]

I think it would be interesting if politicians were subject to the same pension and healthcare system that they enact for the rest of the population.

 

[Winemaker]

Hey, someone's got to pay for those corporate tax cuts.

Where does the money come from to pay the corporations tax bite?

 

[marko]

No one has an unassailable legal right to social security, per Flemming v. Nestor, 363 U.S. 603 (1960). DW and I are starting to consider the possibility that "we" (aka grandchildren) might get something from it, but continue our 30+ year assumption that it will get means tested away from us.

So I paid into the SS system for 40+ years and now I could get challenged on receiving benefits? Just because I LBYM, paid my bills and saved some money?

Again, I don't see any changes ahead for current recipients; too much of a hot potato. If you're 40-ish you might want to develop a Plan B.

 

[athena53]

So I paid into the SS system for 40+ years and now I could get challenged on receiving benefits? Just because I LBYM, paid my bills and saved some money?

Sure. It's already taxed if you have any substantial amount of other income. You'll also pay higher premiums for Medicare B.

 

[target2019]

I should add some info in addition to the post I made above. That is SS in Australia is not as bad as some might think, and in fact better than our SS. Their system has been privatized, and workers actually have their own accounts, something like a portable 401k that they take from job to job. It is called "Superannuation". Each person has his own "lock box" like our 401k and 403b accounts, and the money does not go into a common box like our SS and pensions.

Contributions from employees and employers are compulsory, just like our SS. However, the money in a worker account is really his to draw after retirement, not "shared" with other people. Contributions are before tax, and withdrawals are tax free.

People who are not able to save much for whatever reasons still get the means/income-tested pension as described above, which is more generous than the US SSI for the indigent.

See: https://en.wikipedia.org/wiki/Superannuation_in_Australia.

Ok, AUS pension and SuperAnnuation are two separate benefits. Further down in the wiki article it seems to say that:
https://en.wikipedia.org/wiki/Superannuation_in_Australia#Effect_on_pensions

IOW, their pension is similar to our SS, and their SA is like our 401k, IRA, etc.
Definitely a complicated situation as is ours. It seems like the push-pull of adjustments to these systems will go on forever.

 

[pb4uski]

The original post is a bit of a red herring because it is not sufficiently similar to our SS system.

From what I am reading, the pension in the OP that is means tested is non-contributory and is funded by general tax revenue (essentially what we refer to welfare here in the US) and that welfare is means tested... I don't think anyone would have a problem with that. The backbone of the pension system has mandatory contributions but individual accounts from what I read and that part is not means tested.

Australia has a three-pillar pension system. The first, public pillar, is composed of a means-tested, tax-financed Age Pension that provides basic benefits. The second pillar forms the backbone of the Australian pension system, and is made up of funded individual pension accounts provided by superannuation funds. The third pillar involves individuals contributing to their superannuation funds or to Retirement Savings Accounts (RSAs).

Australia's state pension system operates on a non-contributory basis and is financed by general tax revenues. The Age Pension provides means-tested benefits for men over 65, but at different ages for women, based on their date of birth. By 2014, however, the age limit will be set at 65 for both men and women.

 

[pb4uski]

...IOW, their pension is similar to our SS...

I didn't read it that way... the pension is more like welfare and funded from general tax revenues... not taxes specific to that program like our social security is.

 

[target2019]

I didn't read it that way... the pension is more like welfare and funded from general tax revenues... not taxes specific to that program like our social security is.

They call it pension. Nothing implied beyond that.

The intent is same as our SS, in other words, a safety net. Funding of these concepts is different across the globe. So differently handled in AUS, US, etc.

On a simplistic level, one is a benefit you can't pass on, the other can be passed on.

 

[pb4uski]

But I think that funding differences create a significant difference in how people think about it... since welfare comes out of general tax revenue no one thinks that it is "theirs"... in the case of our SS, the deal was we take taxes/premiums out of your pay while you are working and you receive retirement benefits... so the money was extracted from us with a promise and expectation... so we view it differently... it was an exchange transaction.

If they later say... well, we're changing the deal now that you have paid all those premiums... if you you were smart enough to save as we told you you needed to then you don't get your retirement benefit we promised but Joe down the street who spent his money on stuff will still get his... then all hell will break loose.

 

[Fermion]

We have just as much legal right to SS as a private or public pensioner has to their pension IMO (might not be the supreme court opinion, but there you go). They sent out statements saying this is what you have paid in and this is what your benefit will be on retirement. They have been doing that for years.

 

[pb4uski]

No one has an unassailable legal right to social security, per Flemming v. Nestor, 363 U.S. 603 (1960). DW and I are starting to consider the possibility that "we" (aka grandchildren) might get something from it, but continue our 30+ year assumption that it will get means tested away from us.

And, yes, Australia (like Chile) has a very different system than USA...

What you say is true but there were other facts in Flemming v Nestor that played an important part, specifically that the Act gives Congress the right to amend it, that Congress had passed a law that benefits could be curtailed to those who were deported and the SSA had done so because Nestor had been deported because he was a member of the Communist Party, so there was a lot going on.

What I found interesting in the opinion was:

WE MUST CONCLUDE THAT A PERSON COVERED BY THE ACT HAS NOT SUCH A RIGHT IN BENEFIT PAYMENTS AS WOULD MAKE EVERY DEFEASANCE OF "ACCRUED" INTERESTS VIOLATIVE OF THE DUE PROCESS CLAUSE OF THE FIFTH AMENDMENT. ....

THIS IS NOT TO SAY, HOWEVER, THAT CONGRESS MAY EXERCISE ITS POWER TO MODIFY THE STATUTORY SCHEME FREE OF ALL CONSTITUTIONAL RESTRAINT. THE INTEREST OF A COVERED EMPLOYEE UNDER THE ACT IS OF SUFFICIENT SUBSTANCE TO FALL WITHIN THE PROTECTION FROM ARBITRARY GOVERNMENTAL ACTION AFFORDED BY THE DUE PROCESS CLAUSE.