From 1 January 2017, the asset thresholds and taper rate that apply to the Age Pension asset test will change and an estimated 416,000 age pensioners will be affected. So, how will this affect your retirement income?
While the changes have caused some worry, some pensioners will actually be better off under the changes. According to the figures released by the Government, 170,000 pensioners will be better off. This includes 50,000 pensioners who are currently receiving a part Age Pension moving to a full Age Pension in the New Year. And thanks to the increase of the lower thresholds, the part Age Pensions of 120,000 are expected to increase by up to $30 per fortnight. Importantly, if you’re already receiving the full pension, you will continue to do so, providing your current financial position doesn’t alter.
However, it’s not all good news as the changes mean 91,000 Australians will lose their Age Pension entitlement altogether and about 235,000 will have their part Age Pensions reduced. If you’re one of the unlucky ones who will lose their Age Pension as a result of the change, rest assured that you will have the Commonwealth Seniors Health Care Card, as well as the low income Health Care Card for life (or until you are eligible for the Age Pension again).
Under the changes, the lower asset free threshold will increase, but the upper asset-free threshold reduces, meaning fewer people will qualify for a part Age Pension. In addition to these changes, the taper rate will also increase to $3 for every $1000 by which the asset free threshold is exceeded, meaning the Age Pension payment will reduce to $0 more quickly.
The thresholds will change as follows:
| Current | From 1 January 2017* | |||
| Asset free threshold | Pension cut-off threshold | Asset free threshold | Estimated pension cut-off threshold | |
|
Homeowner |
||||
| Single | $209,000 | $791,750 | $250,000 | $541,200 |
| Couple (combined) | $296,500 | $1,175,000 | $375,000 | $814,250 |
| Non-homeowner | ||||
|
Single |
$360,500 | $943,250 | $450,000 | $741,250 |
| Couple (combined) | $448,000 | $1,326,500 | $575,000 | $1,014,250 |
*Upper thresholds change with Centrelink rate changes. The above estimated pension cut-off figures from 1 January 2017 are based on the 20 March 2016 pension rates and are subject to change. Source: humanservices.gov.au
For those who have reached Age Pension age and are planning on claiming the payment, remember that the balance of your superannuation fund is included under the asset test. If your partner hasn’t yet reached Age Pension age, then although you are assessed as part of a couple, the value of their superannuation is excluded from the asset test.
To be guided through the changes and what they could mean to you, visit AustralianSuper.
If you’re concerned about how the changes will affect your retirement income, it’s important to review your financial situation and seek advice before making any decisions.
This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, the Trustee of AustralianSuper ABN 65 714 394 898. The views expressed are those of YourLifeChoices and not necessarily the views of AustralianSuper. The article contains general information and you should consider if it is right for you.
