From the 1st of January 2017, more than 300,000 older Australians will be affected by changes to Centrelink’s Age Pension Assets Test. It’s a good idea to be aware of the upcoming changes, because if you will be affected, there are options available to you to reduce your assessable assets for the Assets Test to receive more of the pension. Talk to your Financial Adviser today about protecting your retirement income.
A recap of the changes
From January 2017, the limit to qualify for a full pension under the Assets Test with be raised by the government to $375,000 for couples and $250,000 for single people. That’s a difference of +$83,500 for couples and +$44,500 for singles. Which is great news!
Currently, for a part pension, the pension rate payable reduces by $1.50 per fortnight for every $1,000 of assets you own above the Assets Test limit. For example, if you own $10,000 worth of assets over the Assets Test limit, your pension will reduce by $15 per fortnight ($7.50 per fortnight each for couples). You may know this as the ‘taper rate’.
From January 2017, the taper rate is going to increase to $3.00 for every $1,000 of assets you own over the Assets Test threshold. So, if you own $10,000 worth of assets over the Assets Test limit, your pension will reduce by $30 per fortnight.
It may not seem like much on a fortnightly basis, however, over a year this equates to $780 which could be used to fund a nice weekend away, your budget for family Christmas presents, or even the regular service on your car.
In addition, the Assets Test limit to receive a part pension (and the pensioner concession card) will decrease. For pensioners who own their own home, the Assets Test limit for a part pension will decrease to $823,000 for couples and $547,000 for singles. If your assets exceed these thresholds, you will no longer qualify for the part pension you have received in the past.
You still have options to improve your pension benefit
There are a number of strategies you can implement that may help you maximise your pension benefit. These include:
Contributing to your spouse’s superannuation if they are under Age Pension Age
When funds are in superannuation (in the accumulation stage), they do not count for the Assets Test, whilst below Age Pension age.
Improving your principal home
Your home is not assessed under the Assets Test, so now might be an ideal time to do the home improvements you had planned such as remodelling your kitchen, or building that patio you’ve been dreaming of.
When receiving a pension, each financial year, you are able to gift up to $10,000, with a maximum of $30,000 over five years, without impacting your Age Pension entitlements. Also, if you are more than 5 years prior to reaching Age Pension age, you can gift larger amounts above these limits.
Investing in a lifetime annuity
Investing in a lifetime annuity can help provide a regular income throughout your lifetime. Your Financial Adviser can help you choose the right option for you and your situation.
Purchasing Funeral Bonds
With a Funeral Bond, you can invest up to $12,250 to cover funeral costs. Investment earnings are tax free, and upon your death, the investment is able to be redeemed for cash. Where the funeral expenses are less than the balance of the investment, the remaining funds are then paid to your estate.
As the changes did not come into effect until January 2017, you should have taken action by now. However, don’t sit back and relax, as many of the options available are time dependent, so it’s important to speak with your Financial Adviser about the options available, sooner rather than later.
Speak call us today about how you might be affected by these changes and if so, how we can help you minimise the impact on your Age Pension benefits.