age-pension-assets-test-changes

 

 

 

 

 

 

 

 

An estimated $39.5 billion was spent on age pension entitlements in 2013/2014 benefitting 2.4 million Australians, an amount the government does not see as sustainable.

Announced in the Liberal government’s May 2015 budget are a number of proposed changes to age pension eligibility based on the value of assets held outside the family home. Approximately 91,000 wealthier retirees will lose access to the pension as a result of the more stringent asset test thresholds and taper rates, while 170,000 will receive a pension increase. It is estimated 235,000 will have their pensions reduced.

What’s proposed (from 1 January 2017):

  • The value of assets you can have in addition to your family home to qualify for a full pension would increase as follows:
 Home ownersNon-home owners
CurrentProposedCurrentProposed
Single$202,000$250,000$348,500$450,000
Couple$286,500$375,000$433,000$575,000
  • The maximum value of assets retired couples can hold outside of the family home and still qualify for a part pension would reduce as follows:
 Home ownersNon home owners
CurrentProposedCurrentProposed
Single775,000547,000922,000747,000
Couple1,151,500823,0001,298,0001,023,000
  • The taper rate which is the fortnightly amount, by which a person’s pension entitlement decreases under the assets test, will increase from $1.50 to $3 per $1,000 of assets over the lower threshold.

Some examples:

  • Couples who own their own home and have additional assets of less than $451,500 will get a higher pension.
  • Couples who don’t own their own home and have assets up to $699,000 will be better off.
  • Singles who own their own home and have additional assets of less than $289,500 will be better off.
  • Singles who don’t own their own home and who have less than $537,000 will be better off.

Other important changes to Centrelink eligibility:

  • From 1st January 2015, non-taxable superannuation income will be included in the Commonwealth Seniors Health Card (CSHC). This is subject to grandfathering provisions pre 1 January 2015 however the new test will be applied to new account based pensions purchases after this date.
  • The current qualification age for the Age Pension is 65 years, increasing to 67 years by 1 July 2023. This proposed measure increases the qualifying age from 67 to 70 years.
  • On 1 July 2025 the qualifying age will increase from 67 years by six months every two years until 1 July 2035 when the Age Pension qualifying age will reach 70.
    o This change applies to people born after 30 June 1958 who claim Age Pension from 1 July 2025.
    o From 1 September 2017 all pension payments and pension equivalent payments will be indexed by the Consumer Price Index only, which will make indexation arrangements consistent across all social security payments. (proposed).
  • From 1 July 2017 the indexation of some of the social security means test settings will be fixed for a period of three years. These settings are the pension income and assets test free areas for social security pension payments and equivalent Veterans’ Affairs pension payments.

Written by Hugo Sampson of LifeTime Financial Group Melbourne.