THE government’s changes to the Age Pension could affect your ability to plan for a comfortable retirement. Recent reports suggest that more than 300,000 Age Pensioners will have at least part of their pension cut, with just under 100,000 of these people losing all Age Pension entitlements, taking effect from January 2017.
THE AGE PENSION AND ASSETS TEST EXPLAINED
Retirees who are currently aged 65 or over, and who satisfy income and assets tests and other requirements, can receive a full or part pension.
Recently, the government introduced changes to the Age Pension’s assets test thresholds which will take effect from 1 January 2017. The thresholds indicate the value of the assets you can own (excluding your home) before you lose your eligibility for the Age Pension.
WHAT CHANGES?
From 1 January 2017, some people will benefit and others will be worse off, around 50,000 Aussies are expected to be better off un- der the government’s changes and receive the full pension. Approximately 120,000 part-pensioners are likely to add around $30 per fortnight to their wallet.
Full pension, home owners
- If you own a home, the new assets thresholds will allow you to hold assessable assets up to $250,000 (singles) and $375,000 (couples) without impacting full-pension entitlements.
Full pension, non-home owners
- The new assets thresholds for those who don’t own a home will be $450,000 (singles) and $575,000 (couples).
UPSIDE OF LOSING
People who do lose their pensions in 2017 will automatically be entitled to receive a Commonwealth senior’s health card or a low income health card. These cards will provide access to Medicare bulk billing and less expensive pharmaceuticals.
IF YOU’RE ON A PART PENSION WHAT HAPPENS?
From 1 January 2017, around 91,000 part-pensioners will lose their Age Pension and about 235,000 part-pensioners’ payments will be reduced.
■ Part pension, home owners
Couples who are home- owners will not receive the pension when their assets reach $823,000 in value. Single homeowners will stop receiving the pension when they have more than $547,000 in assets.
■ Part pension, non-home owners
Singles who don’t own a home won’t qualify for the pension if assets total $747,000. Couples lose pension entitlements after they’ve accumulated more than $1 million in assets.
HOW YOU CAN PREPARE?
Depending on how these changes will impact you, there could be a number of things for you to consider, including:
- If your entitlements are reduced, how will you replace lost income?
- Do your assets need trimming down? A Financial Adviser can help you with asset reducing strategies.
- Do you have any large planned expenses, such as a holiday or home repairs for example, that might reduce your assets before the changes come in.
WANT TO KNOW MORE?
BE PREPARED: The Age Pension provides income support and access to a range of concessions for eligible older Australians.
Assumptions as at 1 January 2017: For single homeowner: Existing lower asset test projected to have risen from $202,000 to $210,500; Full aged pension projected to be $891 per fortnight; tapering rates are $1.50 per $1000 for current arrangements and $3 per $1,000 for proposed arrangements
For couple homeowners; Existing lower asset test projected to have risen from $286,500
to $298,500; Full aged pension projected to be $1,343.20 per fortnight; Tapering rates are $1.50 per $1000 for the current arrangements and $3 per $1000 for the proposed arrangements
Contact Brad Lonergan (Financial Planner) for more information and retirement planning advice for Newcastle Residents on the Age Pensions changes.
0423 621 120 or email at brad@bmkfs.com.au
Any advice in this article is general in nature and is provided by BMK Financial Services ABN 20 168 684 008 (Charter FP AFSL# 2346650.) The advice does not take into account
your personal objectives, financial situation or needs.
Online source: Produced by AMP Life Limited and published on 10 July 2015.
