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Annual Report 2007–2008 » Chapter 6: Outcome 2 » Output Group 2.1

Performance Reporting

Part two

Output Group 2.1: Support for the aged

Administered items:

Departmental outputs:

Age Pension

Age Pension is an income support payment designed to ensure seniors have an adequate standard of living in retirement. The qualifying age is 65 years for men and 63.5 for women, increasing to 65 by 2014. While the Age Pension is means-tested, the design of the means test ensures that incentives are maintained for the productive use of private savings and investments and for participation.

The Pension Bonus Scheme is intended to encourage older Australians to continue working beyond age pension age, rather than retiring from the workforce and claiming the Age Pension.

The maximum basic rate and pension supplement for the Age Pension are indexed twice a year in line with increases in the Consumer Price Index (CPI). If, after CPI adjustment, the maximum single basic rate is less than 25 per cent of male total average weekly earnings, it is adjusted up to that benchmark, with proportional flow-on to the maximum partnered basic rate.

While indexation in line with CPI increases ensures payment rates reflect increases in prices, the male average weekly earnings benchmark ensures pensioners share in any increases in community living standards as measured by the growth in wages. The real value of pension payments has substantially increased over the last decade.

Price
Estimate $24,673.108m
Actual $24,577.319m
Effectiveness—adequacy indicator: Maximum payments to recipients—index of real value
Estimate Payments indexed to the CPI The actual result was the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual Payments indexed to the CPI
Effectiveness—adequacy indicator: Maximum payments to recipients, single pension base—as a percentage of Male total average weekly earnings
Estimate At least 25% The actual result was the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual At least 25%

Table 2.6  Maximum payments to recipients of pension: index of real pension rates, June 2003 to June 2008
  2003 2004 2005 2006 2007 2008
Age Pension—single 100.0 103.0 103.0 105.1 107.0 108.2
with Rent Assistance 100.0 102.5 102.5 104.2 105.8 106.8
Age Pension—couple 100.0 103.0 103.0 105.2 107.0 108.3
with Rent Assistance 100.0 102.7 102.7 104.6 106.3 107.4

Figure 2.6  Maximum payments to recipients of pension: index of real pension rates, June 2003 to June 2008 (for data please refer to Table 2.6)

Description of Figure 2.6

Figure 2.6 Maximum payments to recipients of pension: index of real pension rates, June 2003 to June 2008 (for data please refer to Table 2.6)

Figure 2.7  Increases to the single pension rate under actual and alternative scenarios, March 2003 to March 2008

Description of Figure 2.7

Figure 2.7 Increases to the single pension rate under actual and alternative scenarios, March 2003 to March 2008

Note: From July 2000, to compensate pensioners for the impact of the Goods and Services Tax, the maximum rate of pension increased by four per cent (half of which was a payment in advance of the normal March 2001 indexation increase). This increase is known as the Pension Supplement. It increases in line with CPI and is paid in addition to the base rate of pension that is set to at least 25 per cent of Male total average weekly earnings.

Effectiveness—independence indicator: Average amount of assessed assets
Estimate $57,897 per year for single age pensioners
$65,222 per year for couples		 The variance is +$11,503 for single age pensioners and +$14,487 for couples.
The variance is partially attributed to increased average pensioner savings and to policy changes—primarily the halving of the assets test taper rate.
Actual $69,400 per year for single age pensioners
$79,709 per year for couples
Effectiveness—independence indicator: Average assessable assets for people receiving maximum rate Age Pension
Estimate $32,430 The variance is –$1,668.
The actual result was similar to the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual $30,762
Effectiveness—independence indicator: Average assessable assets for people receiving less than maximum rate Age Pension
Estimate $109,587 The variance is +$22,922.
The variance is partially attributed to increased average pensioner savings and to policy changes, primarily the halving of the assets test taper rate.
Actual $132,509
Effectiveness—independence indicator: Average amount of assessed income
Estimate $3,868 per year for single age pensioners
$4,389 per year for couples		 The variance is +$636 for single age pensioners and +$848 for couples.
The variance is partially attributed to increases in average pensioner savings and assessed income from financial investments.
Actual $4,504 per year for single age pensioners
$5,237 per year for couples
Effectiveness—independence indicator: Average assessed income per year for people receiving less than maximum rate Age Pension
Estimate $8,998 The variance is +$990.
The variance is partially attributed to increases in average pensioner savings and assessed income from financial investments.
Actual $9,988
Effectiveness—independence indicator: Average assessed income per year for people receiving maximum rate Age Pension
Estimate $903 The variance is +$80.
The variance is partially attributed to increases in average pensioner savings and assessed income from financial investments.
Actual $983

Table 2.7  Average assessed income ($), of age pensioners, 2004–05 to 2007–08
  2004–05
$		 2005–06
$		 2006–07
$		 2007–08
$
Single age pensioners 3,253 3,484 3,850 4,504
Partnered age pensioners 3,925 4,166 4,537 5,237

Ratio of assessed income to total income (including Age Pension):
$25.90 of assessed income to every $100 of total income in 2004–05
$26.30 of assessed income to every $100 of total income in 2005–06
$27.30 of assessed income to every $100 of total income in 2006–07
$29.70 of assessed income to every $100 of total income in 2007–08.

Effectiveness—independence indicator: Average base rate pension reduction per part‑rate pensioner per year
Estimate $2,797 The variance is +$475.
The variance is partially attributed to increased average pensioner savings and to policy changes, primarily the halving of the assets test taper rate.
Actual $3,272
Effectiveness—take‑up/coverage indicator: Percentage of age pensioners with private earnings
Estimate 3.2% The variance is –0.1 per cent.
The actual result was similar to the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 3.1%
Effectiveness—independence indicator: Average earnings per year of partnered age pensioners in employment
Estimate $10,615 The variance is +$1,157.
The variance is attributed to increases in reported earnings.
Actual $11,772
Effectiveness—independence indicator: Average earnings per year of single age pensioners in employment
Estimate $8,761 The variance is +$730.
The variance is attributed to increases in reported earnings.
Actual $9,491
Effectiveness—independence indicator: Average price of purchased income streams
Estimate $123,000 The variance is +$52,177.
The purchase price of income streams purchased in 2007–08 was higher than estimated, partly due to the response by customers to the Better Superannuation measures introduced from 1 July 2007.
Actual $175,177
Effectiveness—take‑up/coverage indicator: Number of purchased income streams
Estimate 29,900 The variance is +16,006.
A higher than estimated number of income streams were purchased in 2007–08, partly due to the response by customers to the Better Superannuation measures introduced from 1 July 2007.
Actual 45,906
Effectiveness—take‑up/coverage indicator: Percentage of age pensioners receiving less than the full rate because of the means test
Estimate 38% The variance is +6 per cent.
The variance is partially attributed to increased average pensioner savings and to policy changes—primarily the halving of the assets test taper.
Actual 44%

Income and asset value limits for full pension as at 30 June 2008
  Single ($) Couple combined ($)
Income free area (per fortnight) 132 232
Asset value limit for home owners (home not included) 166,750 236,500
Asset value limit for non‑home owners 287,750 357,500

Figure 2.8  Proportion of age pensioners receiving a part‑rate pension, June 1998 to June 2008

Description of Figure 2.8

Figure 2.8 Proportion of age pensioners receiving a part-rate pension, June 1998 to June 2008

New entrants to Age Pension have significantly higher average private income and assets than those of the full Age Pension population. This means that the proportion of Age Pension entrants who receive a part‑rate pension is much higher than the proportion of part‑rate pensioners in the entire Age Pension population.

In the three months to 30 June 2008, 57 per cent of Age Pension entrants were granted at part‑rate, while only 44 per cent of the full Age Pension population received a part‑rate pension. Higher average levels of assessable income and assets of Age Pension entrants are partly due to higher average levels of superannuation benefits. The September 2007 relaxation of the assets test taper is also contributing to higher average levels of assessable income and assets.

There is increasing diversity in income and assets holdings of age pensioners. On the one hand, some pensioners have little private income or assets. They may have spent considerable parts of their working life out of the workforce, and/or much of their working life pre‑dated Superannuation Guarantee arrangements.

These factors restrict capacity to accumulate savings. On the other hand, a growing proportion of age pensioners have substantial private resources. The September 2007 relaxation of the assets test taper is reinforcing diversity in the private resources of age pensioners. At 30 June 2008, homeowner pensioner couples had assessable assets in the range from $0 to $849,500 (in addition to the exempt home).

Effectiveness—take‑up/coverage indicator: Percentage of income units headed by a person aged 65 years and over with government pension as principal source of income
Estimate 69.4% The variance is +1.2 per cent.
The actual result was similar to the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 70.6%
Effectiveness—take‑up/coverage indicator: Percentage of income units headed by a person aged 65 years and over with government pension contributing less than 20 per cent of income
Estimate 19.9% The variance is –1 per cent.
The actual result was similar to the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 18.9%
Effectiveness—take‑up/coverage indicator: Percentage of income units headed by a person aged 65 years and over with government pension contributing less than 50 per cent of income
Estimate 30.6% The variance is –1.4 per cent.
The actual result was similar to the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 29.2%
Effectiveness—take‑up/coverage indicator: Percentage of estimated aged population who are clients
Estimate 65% The variance is +2 per cent.
The variance is partially attributed to policy change (for example the halving of the assets test taper rate) and to declining rates of claims for veterans’ pensions.
Actual 67%

Figure 2.9  Take‑up of Age Pension June 1998 – June 2008

Description of Figure 2.9

Figure 2.9 Take-up of Age Pension June 1998 to June 2008

There are more women than men in receipt of the Age Pension (57.5 per cent in June 2008), due to their longer life expectancy and lower qualifying age for Age Pension. More women than men receive the full rate of Age Pension—a total of 57.7 per cent of female age pensioners are paid at full rate, compared to 54.4 per cent of males. This reflects that on average women accumulate lower income and assets to provide for retirement.

Almost 43.2 per cent of age pensioners are single. Singles tend to be older than partnered pensioners and are more likely to receive a full rate pension than partnered pensioners (63.4 per cent compared with 50.8 per cent). As at June 2008, 39.5 per cent of age pensioners assisted by Centrelink were born overseas.

Figure 2.10  Percentage of age pensioners born overseas

Description of Figure 2.10

Figure 2.10 Percentage of age pensioners born overseas

* Does not include Department of Veterans’ Affairs data

Effectiveness—take‑up/coverage indicator: Equitable access to payments for target or special interest groups, based on level of need
Estimate 100% The actual result was the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 100%
Quantity indicator: Number of age pensioners paid Rent Assistance
Estimate 213,643 The variance is +7,859.
The variance is largely seen as reflecting growth in the Age Pension population.
Actual 221,502
Quantity indicator: Number of clients assisted
Estimate 2,045,478 The variance is –6,173.
The actual result was similar to the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 2,039,305

Number of Age Pensions paid under International Social Security Agreements

In June 2008, there were 33,125 Age Pensions paid under agreements (excluding New Zealand and the United Kingdom), averaging $4,553 per year per person. An additional 9,115 Age Pensions were paid under the Agreement with New Zealand, at an average of $5,270 per year per person. Under the former Agreement with the United Kingdom, 236 Age Pensions were paid, averaging $7,157 per year per person.

Provision of financial information

FaHCSIA’s seniors publications promote independence and self‑reliance to retirees and pre‑retirees and provide information on planning, saving and preparing for retirement, investment options and the effective use of savings for self‑support. Around 83,000 copies of these publications were distributed during 2007–08.

Centrelink’s Financial Information Service (FIS) is funded by FaHCSIA. FIS is a free information and education service available to all Australians. FIS aims to ensure people have sufficient information to help them make effective use of their financial resources for self‑support, make informed decisions about retirement issues and have adequate financial preparation for a retirement that allows participation in their community.

At 30 June 2008, there were some 148 full‑time equivalent FIS officers throughout Australia (137 full‑time and 22 part‑time). Between July 2007 and June 2008, officers made approximately 201,000 phone calls and conducted approximately 89,000 face‑to-face interviews. Over the same period, 90,000 people attended seminars. The seminars have a strong focus on encouraging pre‑retirees to plan for retirement. Thirty-nine per cent of attendees were under age 55.

Pension bonus scheme

The Pension Bonus Scheme is intended to encourage older Australians to defer Age Pension and continue working beyond age pension age. It provides a one‑off tax-free lump sum to eligible people and is paid when a person registered in the scheme finally claims and receives Age Pension.

At June 2008, 11 per cent of people over Age Pension age were working. Of these, 27 per cent received Age Pension while they worked and another 21 per cent were registered in the Pension Bonus Scheme. As at 30 June 2008, 152,316 people had registered in the scheme since it commenced on 1 July 1998.

Extension of fringe benefits

In 1993, eligibility for the Pensioner Concession Card was extended to all part‑rate pensioners and certain older long‑term allowance recipients. In response to concerns from the state and territory governments that an increase in the number of eligible card holders would have an impact on their state concession programs, the Government agreed to provide an annual payment as compensation for the increased costs of core concessions—utilities, municipal and water rates, public transport and motor vehicle registration.

Price
Estimate $206.027m
Actual $206.027m
Quality assurance indicator: Certification from state and territory governments that they are complying with the agreement
Estimate 100% The actual result is the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 100%

Concession cards—Australian Government

Card type Card holder numbers Listed dependents
Health Care Card 1,021,812 931,174
(Low Income) Health Care Card 358,109 19,596
Pensioner Concession Card 3,278,492 1,010,152
Commonwealth Seniors Health Card 278,378 0
Total 4,936,791 1,960,922

The Government’s main purpose in issuing concession cards is to provide access to Pharmaceutical Benefits Scheme prescription items and certain Medicare services at a cheaper rate. Other concessions that may be offered to card holders are the responsibility of state, territory or local governments and authorities, and some private organisations.

Concession cards issued by the Australian Government include:

Reimbursement to Great Southern Rail for concessional fares

Great Southern Rail is under contract to provide concessional fares on their services (the Indian Pacific, The Ghan and The Overland) to pensioners, certain veterans and holders of the Commonwealth Seniors Health Card (CSHC).

Some 42,611 passengers took 62,315 trips under the Government’s contractual arrangement with GSR in 2007–08.

Price
Estimate $6.844m
Actual $6.406m

Seniors Concession Allowance

Seniors Concession Allowance is a payment for holders of the CSHC, to help with household costs. The allowance was increased from $218 to $500 a year for CSHC holders. The allowance is paid in quarterly instalments of $125 commencing 20 March 2008.

Price
Estimate $238.774m
Actual $235.232m
Quantity indicator: Number of eligible Commonwealth Seniors Health Card holders paid Seniors Concession Allowance
Estimate 238,593 The variance is +30,320.
The variance is attributable to greater awareness of the CSHC.
Actual 268,913

Telephone Allowance to CSHC Holders

Telephone Allowance assists CSHC holders with the cost of maintaining a telephone service. On 20 March 2008, Telephone Allowance was increased by 50 per cent, from $88 a year to $132 a year, for CSHC holders who have a home internet connection. The allowance is available to telephone subscribers who are CSHC holders where they or their partner have a home internet connection.

Price
Estimate $16.303m
Actual $16.538m
Effectiveness—take‑up/coverage: Percentage of eligible Commonwealth Seniors Health Card holders receiving Telephone Allowance
Estimate 93% The variance is +1.5%.
The variance is attributable to the greater awareness of Telephone Allowance.
Actual 94.5%
Quantity indicator: Number of CSHC holders receiving Telephone Allowance
Estimate 221,891 The variance is +41,128.
The variance is attributable to greater awareness of CSHC.
Actual 263,019

Utilities Allowance

Utilities Allowance is a payment for income support recipients of age or veteran pension age, or who are receiving Mature Age, Widow, or Partner Allowance, Wife Pension, Widow B Pension, Disability Support Pension, Carer Payment or Bereavement Allowance. Utilities Allowance provides assistance with regular household utilities bills. In March 2008, the Utilities Allowance increased from $107.20 to $500.00 per year and payment changed from half yearly to quarterly instalments.

Price
Estimate $611.028m
Actual $613.852m
Quantity indicator: Number of eligible income support customers paid Utilities Allowance
Estimate 2,064,504 The variance is +842,263.
The variance is due to the extension of Utilities Allowance to recipients of Widow B Pension, Wife Pension, Disability Support Pension, Carer Payment and Bereavement Allowance from 20 March 2008.
Actual 2,906,767

Policy services and program management

Price
Estimate $14.009m
Actual $13.712m
Quality—assurance indicator: Research and evaluation is of a high standard, (timely, fulfils terms of reference, complete, methodologically sound) contributes to policy understanding and development
Estimate 100% The actual result is the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 100%
Quality—assurance indicator: Service agreements/contracts that meet legislative, government policy and developmental requirements are in place with all service providers
Estimate 100% The actual result is the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 100%
Quality—assurance indicator: Service providers meet terms and conditions of funding
Estimate 100% The actual result is the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 100%
Quality—client satisfaction: Ministers and their offices are satisfied with the quality of policy advice and department meets standards for policy advice
Estimate 100% Ministers and their offices did not provide feedback on individual output groups, but did provide feedback on departmental performance as a whole. Further information on ministerial and parliamentary services can be found in Part 3 of this report.
Quantity indicator: Major pieces of research and evaluation completed
Estimate 4 The actual result is the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 4
Quantity indicator: Number of contracts/service agreements under management
Estimate 4 The variance is –1.
This is due to movement of the National Information Centre on Retirement Investments to Output Group 4.2.
Actual 3
Quantity indicator: Number of items to Ministers’ offices
Estimate 1,770 items to Minsters’ offices ministerial correspondence
70 submissions and briefings		 Detailed information on actual results for this indicator can be found in Part 3 of this report.
Quantity indicator: Number of service providers under management
Estimate 4 The variance is –1.
This is due to movement of the National Information Centre on Retirement Investments to Output Group 4.2.
Actual 3

Service delivery

Price
Estimate $303.314m
Actual $294.930m
Quality—assurance indicator: Service providers deliver services to the standards agreed with FaHCSIA
Estimate 100% The actual result was the same as the estimate indicated in the 2007–08 FaHCSIA Portfolio Budget Statements.
Actual 100%
Quality—client rights and obligations: Control of incorrect payment and fraud: savings in administered items arising from prevention and review activities
Estimate $6.1 million in fortnightly savings
$44.2 million annually in debts		 The variance of +$720,000 (+11.87%) in fortnightly savings and +$18.24 million (+41.26%) annually in debts is attributable to improved targeting of Age Pension reviews.
Actual $6.82 million in fortnightly savings.
$62.44 million annually in debts

Table 2.8  Reviews and appeals—Output Group 2.1
Client rights and obligations indicator: Percentage of reviews and appeals where the original decision is changed
Payment type Authorised review officers Social Security Appeals Tribunal Administrative Appeals Tribunal
Reviews finalised Percentage changed Reviews finalised Percentage changed Reviews finalised Percentage changed
Age Pension 4,833 40.3% 953 34.8% 232 21.1%

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