Is Your Part Pension Safe?

Pensioners – Beware! Don’t get caught out when the pension rules change. Come 1 January 2017 will see some significant changes to the means testing for Social Security.

What’s changing?

The government is making 2 changes to the assets test. Pensioners will need to be aware of how the changes impact their entitlements. For some, the changes will create a small change, but many will lose their part pension altogether.

Increasing the lower asset test -This refers to the level of assessable assets that can be owned before pension entitlements are affected. Pension payments are reduced once this asset level is exceeded. This change will result in around 50,000 part pensions qualifying for a full pension. Those on a full pension should remain unaffected by this change.

Depending on your relationship and home owner status the thresholds will differ.

The second change relates to the taper rate -the taper rate is the rate at which pension entitlements reduce when you exceed the assets test lower threshold. The rate will be increased from $1.50 to $3 per fortnight for every $1000 you are over the assessable asset level. As a result of this increase the upper threshold is effectively lowered meaning the pension cuts off at a lower level of assets. It is estimated that approx. 91,000 part pensioners will no longer qualify and a further 23,000 will have their part pension reduced. Once again the upper threshold will depend on your relationship and home owner status.

Those who have their pension cancelled as a result of these changes will automatically be issues with a Commonwealth Seniors Health Card (CSHC).

Income tested pensions? While the changes are more directly relevant for assets test pensioners, those who have their entitlement determined under the income test may not be unaffected, it may mean certain pensioners will now become assets tested.

Can you do anything?

There are some strategies that may be able to reduce the impact of the new rules. We suggest you seek advice well before January to allow you time to consider your options.

General Advice Warning - This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial or tax adviser before making any investment decisions.