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Book a FREE consultation
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Get started with a free strategy consultation and receive a copy of the Good Fortune Guide – written by James McFall, Managing Director Yield FP and 2020 National Finalist Certified Financial Planner of the Year to help educate you on your Financial Plan.

Changes To The Age Pension Rules — Will You Be Affected?

Retirement Planning Successful retirement planning requires your investments to last your entire life after-work, which requires a long term and well thought out structure for you to achieve this.

From 1 January 2017 Government changes to the Age Pension are likely to reduce pensioner entitlements. It’s important that you understand how the changes could affect you.

Increase In the Assets Test Threshold

The Assets Test threshold is the amount of assets pensioners can hold before their pension starts to reduce under the Centrelink Assets Test. The table below shows the new thresholds from 1 January 2017.

 

Assets Test Thresholds From 1 January 2017

‘Taper Rate’ Increase 

The taper rate is the rate at which the Age Pension reduces as assets increase. From 2017 the taper rate will increase from $1.50 a fortnight to $3 a fortnight. This means the maximum Age Pension a pensioner can receive will be reduced by $3 per fortnight for every $1,000 of assets they hold above the Assets Test threshold.

How The Changes Could Affect Your Age Pension

The higher Assets Test thresholds will generally mean:

  • Age Pension recipients with an asset value ‘around’ the thresholds are likely to see an increase in their Age Pension entitlement, and
  • Age Pension recipients with assets above the threshold are likely to see a reduction in their Age Pension — in some cases to zero — as a result of the increased taper rate.

What do changes to The Age Pension really mean? Let’s look at an example.

Retired couple Betty and John are both 68 years old and own their home. They have $823,000 in total assets and currently receive a part Age Pension of $500 per fortnight. If their assets remain unchanged on 1 January 2017, their Age Pension is estimated to reduce to zero. If their assets either increase or decrease, the new rules could still impact their pension and the likely impact to Betty and John’s Age Pension entitlements at various asset levels is explored in Chart 1.

 

Chart 1[1] – The Effect on a Couple Homeowner’s Age Pension as of 1 January 2017

 

[1] Based on information released by the Government and can be found at – http://www.liberal.org.au/latest-news/2015/05/07/fairer-access-more-sustainable-pension. The chart also assumes all assets are financial assets subject to deeming.

Yield Financial Planning is Here to Help

At Yield, we understand these issues and can advise on how a variety of other strategies could improve a retirement outcome. If you think you or a loved one will be affected by these changes, don’t leave retirement planning to chance.

After all, most retirees want security and peace of mind that they can enjoy their retirement years knowing their financial strategy is clear.

If you have any questions regarding the likely impact of these changes on entitlements or would like to explore strategies to help reduce the impact, we’re here to help.

Important Note 
Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.
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Who we serve – We help time poor professionals and business owners who intuitively know they should be doing more to improve their financial position and are seeking an expert to guide them on financial planning strategies. Our clients want personalised financial planning advice and to feel empowered and confident that they can achieve a secure transition to retirement.

What we do – We gain a deep understanding of your current financial position and preferences, what you value and want to achieve. We then help you develop a highly personalised financial plan, to show you how to make your money work harder for you. Ongoing we regularly monitor and measure progress against your plan projections, to show you how you’re tracking and help you manage change to your advantage.

How we do it – We apply our proven expertise in investment markets (Shares & Property), Tax and Debt structuring, Retirement Planning, Risk management and Estate planning, to help you reorganise the way you use your money to achieve your desired outcomes.

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