Are you prepared for the changes to the Age Pension assets test?


Are you prepared for the changes to the Age Pension assets test?

Are you prepared for the changes to the Age Pension assets test?

How the assets test will work in 2017 could increase your Age Pension entitlements, or take some or all of them away.

With revisions to the Age Pension assets test just around the corner, it’s important to understand how the changes could impact you, particularly with part-pension thresholds somewhat tighter than initially projected.

These thresholds are the value of assets you can own (excluding your home) before you lose eligibility for the Age Pension.

Who the changes will affect

The Age Pension assets test changes will affect Age Pension recipients, aged 65 and over. To be eligible for a full or part Age Pension, retirees must satisfy an income test and an assets test, as well as other requirements.1

According to reports, changes to the assets test, effective 1 January 2017, will see more than 50,000 additional Australians receive the full Age Pension. Meanwhile, roughly 300,000 retirees on the part pension will have their entitlements reduced, with about 100,000 losing all entitlements.2

What’s actually changing in 2017?

The Age Pension assets test thresholds will change

The cut-off thresholds previously announced were only projections, as Age Pension rates were not updated until 20 September 2016.

Following the recent update to Age Pension rates, the part-pension cut-off thresholds are a bit tighter than previously announced, meaning more people could be affected.3 The lower thresholds for eligibility for a full pension remain unchanged.

If your assets are below the thresholds in table one, you will be eligible for a full pension under the 2017 assets test.4

 

Full pensionCurrent asset limits2017 asset limits
Non-homeowner (single)$360,500$450,000
Non-homeowner (couple)$448,000$575,000
Homeowner (single)$209,000$250,000
Homeowner (couple)$296,500$375,000
  

 

The table below outlines the assets test cut-off point for those on a part pension. If you have assets above these limits, a part-pension will no longer be payable.5

Part pensionCurrent asset limits2017 asset limits
Non-homeowner (single)$945,250$742,500  (initial projection $747,000)
Non-homeowner (couple)$1,330,000$1,016,000  (initial projection $1,023,000)
Homeowner (single)$793,750$542,500  (initial projection $547,000)
Homeowner (couple)$1,178,500$816,000  (initial projection $823,000)

The Age Pension assets test taper rate will increase

This means that pension payments will reduce by $3.00 per fortnight for every $1,000 of assets above the lower assets test threshold. Currently, the taper rate is $1.50 (75c each for couples) per fortnight, which means from 1 January 2017 pensions will reduce at a faster rate.

What assets are taken into account?

The market value of most of your assets is taken into account when calculating your Age Pension. This includes, but is not limited to, things such as:

  • Property (excluding your home)
  • Motor vehicles, boats and caravans
  • Financial investments
  • Superannuation if you’re over Age Pension age
  • Business assets
  • Household contents and personal effects.

Find out more about which assets are assessable on the Department of Human Services website.

Upside to losing your benefits

People who lose their Age Pension in 2017 as a result of the changes will automatically be entitled to receive a Commonwealth senior’s health card and/or a low income health care card. These cards will provide access to things such as Medicare bulk billing and less expensive pharmaceuticals.

Preparing for the changes

Depending on how the changes may impact you, there are a number of things worth exploring and talking to us about, including:

  • How you might replace any lost income if your entitlements are reduced
  • How you might be able to trim down your assets before the changes come in, to retain your current entitlements—for example, gifting within annual limits, moving savings into a spouse’s super, or bringing holidays or home renovations forward
  • How strategies outside of asset reduction may be able to help—working for longer or reviewing your budget in retirement.

More information

Contact Centrelink to find out how your Age Pension entitlements might be affected or contact us to explore possible strategies.
1 http://www.humanservices.gov.au/customer/services/centrelink/age-pension
2, 3 http://www.superguide.com.au/how-super-works/300000-retired-australians-to-lose-some-or-all-age-pension-entitlements
4, 5 https://www.humanservices.gov.au/customer/enablers/assets

Online source: Produced by AMP Life Limited and published on 14 October 2016. Original article.

Important information

© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

 

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