Tips to prepare for changes to Age Pension assets test

In 2017 the Government is making changes to the Age Pension assets test which could affect the entitlements you receive. The changes kick in 1 January 2017 so here are some tips to help you understand what the change may mean for you.

To be eligible for a full or part Age Pension you need to satisfy an income test and an assets test, as well as other requirements.1 The upcoming changes will only affect the assets test thresholds.

Thresholds are the limits on the value of assets you can hold to be eligible for the Age Pension, and excludes the family home.

1.     Understand what’s changing

  • Thresholds for part-pension are reducing
    This means approximately 300,000 people may receive less Age Pension and 100,000 people may no longer receive the Age Pension.2
  • Thresholds for full pensions are increasing
    This means approximately 50,000 more people will be eligible for the full Age Pension.2
  • Age Pension assets test taper rate will increase
    This means pensions will reduce at a faster rate.
    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. This means, which means from 1 January 2017 pensions will reduce at a faster rate once the lower asset threshold has been reached.

 

2.     Check your eligibility

The following tables will help you see how you may be affected.

Thresholds for a full pension

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

Full pension Current asset limits 2017 asset limits

Homeowner (single)

$209,000

$250,000

Homeowner (couple)

$296,500

$375,000

Non-homeowner (single)

$360,500

$450,000

Non-homeowner (couple)

$448,000

$575,000

 

Thresholds for a part pension

The following table 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 pension Current asset limits 2017 asset limits

Homeowner (single)

$793,750

$542,500  (initial projection $547,000)

Homeowner (couple)

$1,178,500

$816,000  (initial projection $823,000)

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)

 

Health card for those who lose the Age Pension

If you’re no longer eligible for the Age Pension in 2017 as a result of the changes, you’ll 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.

 

3.     Have a plan

Depending on how the changes may impact you, there are a number of things worth exploring and talking to your financial adviser 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
  • Other strategies that may be able to help—working for longer or reviewing your budget in retirement.

 

4.     We’re here to help

Contact Centrelink to check how your Age Pension entitlements may be affected.

Or contact your financial adviser to explore possible strategies to help you manage any impacts.

Contact details

Assets that 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.

What you need to know

This article was originally produced by AMP Life Limited and published on 14 October 2016. You can view the original article here.

© 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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Although this information is from sources considered reliable, we do 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, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.