From 1 January 2017, there are some important age pension changes that could impact your benefits and warrant some pre-emptive action.
The lower asset threshold that determines your eligibility for the full age pension will increase. This threshold varies, depending on your relationship status and whether or not you own a home. It’s also indexed periodically by the Government. To find the current thresholds visit humanservices.gov.au.
In addition, the age pension payable will be reduced by $3, for every $1,000 you hold in assets above this threshold. The current reduction amount, known as the ‘taper rate’, is $1.50 per $1,000. This will lower the asset test upper threshold after which no pension is payable.
How will these changes impact your entitlements?
Your age pension entitlements are assessed under both an income and assets test. The impact of these assets test changes on your entitlement to age pension will depend on a range of factors.
If we look at the current and new asset test thresholds for a homeowner couple for example, the lower threshold will increase from $296,500 to $375,000 on 1 January 2017. This means more people will be eligible to receive a full pension under the asset test assessment. However, the income test may override the asset test (depending on the type of assets and income) and reduce their pension payment.
In contrast, the asset test upper threshold after which no pension is payable will reduce from $1,175,000 to $818,000 for a homeowner couple on 1 January 2017, resulting in many pensioners losing entitlement to pension altogether.
What to do next?
The thresholds in the above example apply exclusively to home-owning couples and the dollar values would be different if you are single and/or not a home-owner. The best way to determine how you may be affected is to make an appointment with Foundation Wealth Planners to review your financial position and determine if any strategies can be implemented to improve your entitlement to the pension going forward. The earlier you do this, the more you may be able to take advantage of any suitable strategies.
To find out how the changes could impact you and discuss strategies that may assist you, contact Foundation Wealth Planners on 02 6813 0977.