Will the age pension still be around when you retire?
Financial planners sometimes warn their clients that the age pension is vulnerable to political risk. This means that the federal government may tinker with it further, making it harder to rely on it for retirement plans.
"With the strike of a pen, there's a risk that the age pension could not be there in some shape or form. It's certainly not going to be easier for people to get the age pension," says Darren James, financial planner with MBA Financial Strategists.
Planners such as James have a point. The government keeps changing the rules, arguing that an ageing population is putting pressure on the budget.
First it raised the pension age to 67 for people born on or after January 1, 1957. For anyone born on or after July 1, 1952, it is now 651/2 years.
Then the government tightened the assets test from January 2017.
These changes have affected more than 400,000 people.
Around 91,000 have lost their pension altogether and a further 235,000 have seen their part pension reduced. On the upside, 171,000 are expected to be better off, with around 50,000 who previously received a part payment now eligible for a full pension.
A further 120,000 on a part pension are expected to have their payment increased by $30 a fortnight.
However, the government assures us that the age pension will always be available.
Ross Clare, director of research at the Association of Superannuation Funds of Australia (ASFA), who wrote a report on The Age Pension, Superannuation and Australian Retirement Incomes, argues that the current age pension system will remain affordable well into the future.
He says that while financial planners try to scare people about the age pension, it will always be around because it is affordable for the Australian economy.
"The Australian government spends under 3% of GDP on the age pension. It is more affordable for the government in Australia than just about any other country."
The full age pension is around 28% of average weekly earnings and on its own just about satisfies the ASFA standard for a "modest" lifestyle in retirement.
That excludes holidays, eating out, bottled wine, paid leisure activities and home repairs.
Of the 80% of retirees who receive the age pension, two-thirds get the full amount while a third receive a part payment. Government projections suggest that under current rules by 2050 75% will receive the age pension, with a third qualifying for the full rate and two-thirds on a part pension.
James says that even though the assets test was recently tightened, eligibility is still generous.
For example, the home isn't counted and pensioner couples owning a home are allowed to hold more than $800,000 in assets.
"Also you can earn quite a lot of money before the age pension is cut off," he says.
A bonus in qualifying for a part pension is the pensioner concession card, which provides a range of discounts that can be worth, depending on your needs, around $5000 to $6000 a year.
It gives pensioners access to cheaper pharmaceuticals as well as benefits offered by state governments on property and water rates, energy bills, car registration and public transport.
In the GFC, self-funded retirees became eligible for the age pension because sharemarkets halved, slashing the value of their assets.
This is a good example of how the pension provides insurance against investment or market risk. It also protects against inflation risk and longevity risk.