More than 90,000 Australians will no longer qualify for the pension and an extra 235,000 will have their payments cut under changes to save the government $2.4 billion in next week's federal budget.
Social Services Minister Scott Morrison on Thursday said that under the changes to be introduced in January 2017, more than 170,000 pensioners with modest assets will have their pensions increased by an average of $30 per fortnight. And tax incentives for self-funded retirees would be retained.
"Welfare is for need. Superannuation requires incentive," Mr Morrison said.
Under the changes, 91,000 people who currently receive the pension will no longer qualify and payments will be reduced for another 235,000 people.
"All those affected by the scaling back of the maximum asset threshold under this proposal will be guaranteed eligibility to the Commonwealth seniors health card," Mr Morrison said.
"The government does not support Labor's proposal to tax superannuants more on the income they have generated for their retirement.
"Receiving a government welfare payment is not the same as being able to keep your own money. That is what we believe in the Coalition."
Single people who lose their pensions will need to draw down about 1.8 per cent on their additional assets to maintain their current income level. Couples will need to draw down 1.76 per cent.
Mr Morrison also confirmed that the government's plans announced last year to index the pensions of 4.1 million people were now "off the table".
"We always said if something was to come off the table, something has to come on the table," he said.
Mr Morrison said more than 90 per cent – or 3.7 million pensioners will be either unaffected or better off as a result of the changes.
Couples who own their own home with extra assets of less than $451,500 will get a higher pension. People with multimillion dollar homes will not be disadvantaged because their home will not be included in any assets testing.
"The family home will not be included in the assets test and never will under a Coalition government," Mr Morrison said.
"At the same time the government will reduce the maximum value you can hold to qualify for a part pension."
The assets that couples can hold in addition to their home to qualify for part payments will be reduced from $1.15 million to $823,000. For single home owners the reduction will be reduced from $775,00 to $547,000.
"For pensioners who do not own their own home, their thresholds at both the lower end and the higher end will be set at $200,000 above those for pensioners who own their own home.
"This increases the gap between home-owning pensioners and non-home owning pensioners on these thresholds by just over a third.
"That is intended to recognise the high living costs associated with pensioners who don't own their own home."
Mr Morrison said the changes to achieve a "more sustainable pension" restores the $3 taper rates changed by the Howard government in 2007 when the budget was in surplus.
"Those levels of taper rate changes from 2007 when it was reduced from $3 to $1.50 are no longer affordable," he said.
Mr Morrison said the government will also close a loophole that is allowing 48,000 on higher incomes from some public sector and large corporate defined benefit superannuation schemes to "effectively fly under the radar on the income test for the pension".
The change will not apply to any military or veterans pensions, the means test treatment of income streams purchased from retail providers such as AMP or self-managed superannuation funds.
"Closing this loophole will save taxpayers around $470 million in the budget and forward estimates," Mr Morrison said.
