Understand the upcoming changes
On 1 January 2017 the assets test used to calculate the Age Pension amount is changing. It’s estimated that due to this change around 170,000 Age Pension recipients will get an increased payment, while around 326,000 pensioners will have payments reduced, or cancelled altogether.1
The first change is an increase to the assets test free area. This is the value of assets you can have (not including exempt assets such as your family home) before your entitlement to a full Age Pension is affected.2 The table below shows how much you can have in assets and still receive the full pension. This is the change that will result in some people getting more Age Pension.
1 January 2017
Couple non-home owner
The second change is to the taper rate for a part pension. This is the rate that your payment reduces by for every $1,000 in assets you have above the limits in the table above. Currently your pension payment reduces by $1.50 for every $1,000 you have above these limits, until it reaches $0. From 1 January 2017 it will reduce by $3 for every $1,000. This is the change that will result in some people having their payments reduced, or cancelled completely. The table below shows how much you can have in assets before your part-payment stops.3
If your Age Pension payment is cancelled on 1 January due to these changes, your Pensioner Concession card will also be cancelled. However you will become eligible for a Commonwealth Seniors Health card, and will not be required to meet the income test requirement to receive the card.
You can get an estimate of what Age Pension payment you’ll receive under the assets test using the handy assets test estimator on the Centrelink website.
Remember, your income is also assessed when calculating what your payments will be. If the income test results in a lower payment than the assets test, this is the amount you will receive.4
Carol and Ian’s story
Carol and Ian own their own home and have $350,000 in additional assets. Their Age Pension payments are assessed using the assets test. Under the current rules their assets are above the maximum limit for a full Age Pension, and they are entitled to a fortnightly part-payment of $1,242.16.
From 1 January 2017, their assets fall under the maximum limit to receive a full Age Pension, so their payments will increase to $1,322.40 a fortnight.
Paul owns his own home and has $595,000 in additional assets. His Age Pension payments are assessed using the assets test. Under the current rules he is entitled to a part-payment of $298.10 a fortnight.
From 1 January 2017 the value of his assets will exceed the limit at which the Age Pension cuts out, so his pension payments will be cancelled.
If your Age Pension payments will be reduced from 1 January, and you're concerned about how this could affect you, why not have a conversation with QInvest? A QInvest adviser can look at your overall situation, and suggest strategies to help you make the most of your finances. Call 1800 785 243 or head to the QInvest website to make an appointment.
1 Budget Review 2-15-16 Index Michael Klapdor http://www.aph.gov.au/About_parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201516/Pensions
2,3 For further exemptions see http://www.humanservices.gov.au/customer/services/centrelink/age-pension
4 Exemption to means test exists for individuals who are permanantly blind (s1065-A1 of the Social Sercurity Act 1991).