Both parties under attack over ongoing deeming rate "rort"
Estimates that over half a million pensioners are being severely short-changed by the current deeming rate have led to demands for urgent action.
National Seniors Australia Chief Advocate Ian Henschke said the past four years had seen a "pensioner tax by stealth" because the last time the deeming rate was adjusted was in early 2015.
This was despite the fact there had been five official interest rate cuts by the Reserve Bank since then, meaning the deeming rate of 3.25 per cent for those with assets over $51,200 was far removed from the current cash rate of 1 per cent.
Deeming rates are used to calculate how much some pensioners are estimated to be earning on their financial investments, with their age pension reduced accordingly.
But Mr Henschke said interest rates on invested cash were "out of whack" with the deeming rate by over 2 per cent, meaning the government was stripping pensioners of financial entitlements.
"It's quite a simple process," he said. "If you take a little bit of money off a lot of people, you make a lot of money."
Social Services Minister Anne Ruston said this week the government was reviewing the deeming rate, but Mr Henschke predicted it would be a "too little, too late" response to overwhelming criticism.
He said it was unlikely the government would cut the rate to bring it fully in line with the cash rate, meaning pensioners would continue to be disadvantaged.
"We wait with interest to see what Minister Ruston will do when she finally lowers the deeming rate," he said.
"And the millions of older Australians and their families affected by that change will judge her and the Coalition by the amount it changes."
Mr Henschke said it was also time to take politics out of the pension and set up an independent body to establish what the deeming rate should be and also what the pension should be.
Both major parties had been in government during the period since 2010 when the deeming discrepancy had worsened.
"It's time to take it out of the hands of politicians where it's open to misuse, where increases to age pension are achieved by short-changing retirees on the deeming rate," he said.
"If you've got hundreds of thousands of people being affected by this, you make hundreds of millions of dollars."
He said both parties had been guilty of the same rort, with a graph of the two interest rates showing the distance growing wider apart "like a great big mouth opening to take money off pensioners".
"The game's up. It has to stop," Mr Henschke said. "The Reserve Bank has to be given the power to set the deeming rate in Australia."
Many pensioners put their money into a bank account because they wanted to have some security, but Mr Henschke said the disparity in rates meant that very action was the reason they were losing some of their pension.
"That is a tax on every pensioner's bank account. Isn't that just an appalling situation," he said.