The commencement of the 2017 calendar year will see some major changes for the means testing of pensions.
Increased Lower Asset Test Threshold
Lower pension asset test thresholds (also known as the assets test free area) will increase from 1 January 2017 resulting in around 50,000 part pensioners qualifying for a full pension.
Increased Taper Rate
However, the assets test taper rate will increase from $1.50 per fortnight for every $1,000 above the asset threshold to $3 per fortnight. This effectively unwinds the change made in 2007 where the taper rate was reduced from $3 to $1.50. It is estimated that approximately 91,000 part pensioners will no longer qualify for the pension and a further 235,000 will have their part pension reduced.
Asset levels and the Impact of the 2017 Pension Changes
The actual impact of these changes will depend on the pensioner’s relationship status, homeowner status and whether they are asset tested or income tested.
Couple pensioners may lose up to $14,467 pa (combined) in benefits as a result of these changes. The pensioner impacts changes are illustrated below.
Centrelink and Other Resources
Please note that Centrelink is writing to clients who may be affected, and outlining in a letter what that impact is likely to be from 1 January 2017.
Those that have their pension cancelled as a result of these changes will automatically be issued with a Commonwealth Seniors Health Card (CSHC), or a Health Care Card (HCC) for those under pension age, without the need to satisfy the usual income requirements.
Veterans whose service pension is cancelled as a result of these changes will retain their Veterans’ Affairs Gold Card.
Those In Retirement
If you would like more information on how you may be affected by the pending changes, there are more resources and information available on the Department of Human Services website, at the following link:
Queensland residents can also apply for a Queensland Seniors Card and Concession Card. More information can be found at:
Clients with an existing Financial Adviser should also discuss any variations required with their existing financial strategy.
Those Considering Retirement
For many approaching retirement this represents a genuine need to revisit their goals and objectives in preparing for retirement. Previously planned expectations for desired retirement income and living standards may no longer be achievable as a result of these pension changes. This could mean that expectations may need to be reduced, expected retirement age may need to be increased, or they may have to maintain casual or part time employment to supplement their income needs in retirement.
To discuss these issues in more detail we recommend seeking qualified financial planning advice. If you would like to speak with one of our qualified Financial Advisors, then please contact the Carey Group on (07) 4760 5900 or email email@example.com to request an obligation free appointment.
Disclaimer: Carey Financial Pty Ltd (www.careygroup.com.au) is an authorised representative of Securitor Financial Group Ltd and provides financial planning services for superannuation, managed investments, personal risk insurance, shares and self-managed superannuation fund investment advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.