For Matthew Sherwood, the head of investment market research at Perpetual, the 2014 budget is one of those. In Sherwood’s opinion, it will rank alongside the 1988 "return to surplus" budget, the 1996 "spending reductions" budget and the 2000 "goods and services tax" budget as those that change the economy.

The 2014 budget will lead to smaller government, boost infrastructure investment and cut household dependency on government payments. Everyone is hit by the budget. There is a co-payment when seeing a doctor and higher petrol prices. There is also a six-month wait for unemployment benefits for those under 30, higher university fees and tighter eligibility for family tax benefits.

The measures to slow the growth in government outlays for the age pension will not start for three years, but they are significant. They include working for longer before receiving the age pension at 70 and a tightening of access to the age pension for those who reach the qualifying age.

On the other side of the ledger, the government will pay employers up to $10,000 for employing over-50-year-olds who have been unemployed for at least six months.

Harder to access age pension

The changes are going to make it much harder to arrange our personal finances to pick up at least a part age pension, says Louise Biti, a director of Strategy Steps. “Pensioners, particularly full-age pensioners, are going to get a bit of a shock”, she says.

The changes to the age pension will make people think not much is being taken away, but they will actually have a big effect on the number of people accessing the pension.

There is the change in the indexation of the age pension and the disability pension so that it will rise more slowly than it has in the past. The thresholds for the income and assets test for the age pension will be frozen for three years from July 1, 2017. Pensioners will be deemed to have earned more interest income from their financial assets from September 2017.

These measures, added together, will have a significant impact on access to the age pension and to the payments pensioners receive.

The budget also contains a series of hits for senior Australians. The dependent spouse tax offset - which is available to people with dependent spouses aged 60 or older - will be axed. And the pensioner education supplement will be abolished and a scheme to help seniors shift to a smaller residence, announced in last year’s budget by the Gillard government, will be scrapped.

Pensioner concessions

Biti says one of the main strategies of financial planners is to structure their wealthier clients’ financial affairs so they pick up at least a couple of dollars of the age pension each fortnight. That is because even a few dollars of age pension entitles the client to pensioner discounts. These are extensive and, combined with the seniors cards offered by the states and territories, provide discounts on utilities bills, rates and car registration. Private business also recognise the cards for discounts.

However, the government will scrap a range of concessions, many provided by the state and territories, for a saving of $1.3 billion over four years. “That is the killer,” Biti says. It is hard to put a dollar value on the concessions, but they could be worth between $2000 and $3000 a year for many seniors, she says.

It is unlikely the states could continue to offer the concessions. They might have to reduce the level of concessions if they are not being subsidised by the federal government.

It remains to be seen whether this will affect the concessions private businesses offer seniors, as some of these businesses, such as private transport companies and telecommunications companies, receive subsidies from the federal government.

Mindset needs change

About 80 per cent of retirees receive at least a part age pension, but that percentage will fall if the changes in the budget are passed by the senate.

“People should aim to be as self-sufficient as possible, at least in the early retirement years,” Biti says. They should only be looking to rely on the age pension later in retirement, she says.

Those still accumulating their retirement savings should consider having some money outside of super.

Although the preservation age - the age at which superannuation can be accessed - was unchanged in the budget, it is very likely it will rise. The preservation age is heading to 60, depending on birth date, but the financial services industry is pushing to have a five-year gap between it and the age pension age. With the pension age heading to 70, that would mean a preservation age of 65.

The preservation age will probably be considered by the Murray review into the financial system that will deliver its final report by the end of this year.

Philip La Greca, AMP SMSF administration head of technical services, says there might even be a restriction on how much of the superannuation money can be taken as a lump sum.

Biti says: “You need to have money outside of super that can be accessed when you want it." The money might be needed to fund the gap between retirement and the preservation age. “If you rely on welfare, then you lose control and choice over how long you work,” she says.

Raising the preservation age or restricting lump sum withdrawals will likely mean more savings intended for retirement held outside of super.

There is a big difference between having access to super at age 60 and having access at age 65. A 45-year-old might decide they can live with access to super at age 60. But if the age is 65, that is another 20 years and the 45-year-old might be more inclined to forgo the tax concessions of salary sacrificing into super in favour of saving outside of super and paying higher taxes on the money, La Greca says.

SAVING FOR RETIREMENT

The budget revealed a further pause of one year in the rise of the superannuation guarantee from 9.25 per cent to 12 per cent.

Before the last federal election, the Coalition said it would delay Labor’s planned rise in the superannuation guarantee to 12 per cent until June 30, 2022. But it will delay the rise to 12 per cent by a further year so that it will not reach 12 per cent until July 1, 2023.

The government has blamed the delay on the senate for not passing the government’s schedule with the two-year delay. However, the further delay casts doubt whether the superannuation guarantee will ever reach 12 per cent under a Coalition government.

Under the new schedule, the guarantee will rise from 9.25 per cent to 9.5 per cent on July 1 this year and stay at 9.5 per cent until June 2018. It will then rise by 0.5 percentage points each year until it reaches 12 per cent from July 1, 2023.

Calculations by industry super lobby group Industry Super Australia show that this further pause in the rise of the superannuation guarantee and the measures to tighten access to the age pension could result in a 25 per cent reduction in the retirement income of a 45-year-old on average earnings.

Unrelated to the budget, older Australians have higher caps on how much they can salary sacrifice into superannuation.

The cap is $35,000 for those aged 60 and over in the current financial year compared with $25,000 for everybody else (although that will rise to $30,000 next financial year).The higher cap will be extended to those aged 50 and over in the 2014-15 financial year or a later financial year.

The caps are not as generous as they seem, because they include 9.25 per cent compulsory superannuation guarantee.

WEALTHY RETIREES HIT

The budget takes direct aim at wealthy retirees with a tightening of access to the Commonwealth Seniors Health Card.

The card is available to those of age pension age who do not qualify for the age pension. It entitles the holders to discounts on prescription medicines and health services, among other things.

It is means tested at about $80,000 year for couples combined, but that does not include income from untaxed superannuation funds, meaning the card is hardly means tested at all.

Under the change to take effect from the start of next year, income from super will be included in the income test. Those who hold the card now and obtain a card before the change will continue to be assessed under the existing rules.

The 300,000 holders of the card also qualify for the seniors supplement, worth just under $1321 a year to couples combined. The supplement will be abolished altogether after the Commonwealth seniors health card holders receive their June 2014 payment.

The tightening of the access to the Commonwealth seniors card will be offset somewhat, with the eligibility thresholds for the card to be indexed from September 2014.