We’ve seen so many government blunders over the years that most of us have become numb to them. Another headline, another policy misfire – and we barely shrug.

But occasionally a decision emerges so baffling, so detached from common sense, that it forces you to sit up and pay attention. What follows is, undoubtedly, one of the most damaging and counterproductive policies affecting older Australians: a system that actively discourages pensioners from working by slugging them with punitive income tests.

Our pension system is not built to help retirees who need it most.Credit: Simon Letch

Australia is desperately short of workers and encouraging pensioners to work could help fill workforce gaps. Just as important are the benefits for retirees themselves. A happy retirement depends heavily on having a sense of purpose and social connection. Working when you’re older provides both, plus some extra income.

The real problem is revealed when you look at how the rules treat two very different hypothetical retirees. Take the Bradleys, a wealthy couple with $800,000 in super and receiving a part pension. If they wished to make some extra money from working, they would be able to earn an extra $47,724 a year with no effect on their pension.

Contrast this with Jenny, who is a single pensioner with no assets. If she tried to supplement her income through work, she would lose 60 per cent of her combined salary and pension.

The disparity arises from the interplay between the assets test and the income test. For pension eligibility, people are tested under both systems, and whichever results in the lowest pension........

© WA Today