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Changes to the Age Pension

15/11/2016

We've had a number of questions recently from people asking for a better understanding of the scheduled changes to the pension in January 2017. So in this week's blog post we're going to provide you with a summary of the upcoming changes - along with links to where you can go for more information.

Why it's changing:

According to the Department of Social Services fact sheet ‘Rebalancing the assets test', Australians are living longer than ever before with the number of people aged 65 and over projected to double by the year 2055.

The changes to the age pension assets test were contained within the 2015 Federal Budget and quickly passed into law on the condition, at the request of COTA and the Greens, that the government establish a review of superannuation taxation. (The review resulted in the reform package announced in the 2016 Federal Budget which has just been introduced to Parliament).
We understand that the changes to the assets test from January 2017 will result in:


• Around 170,000 part pensioners receiving more money
• Around 50,000 part pensioners moving to a full pension
• Around 235,000 part pensioners losing some money
• Around 90,000 part pensioners no longer receiving any age pension payment
• More than 90% of pensioners being either better off or having no change to their pension

The Government claims that those most affected will only have to draw down a maximum of about 1.8 per cent of their assets to make up for the loss of their part pension.

What's changing:

• Asset limits
New assets test limits will apply - the assets test free area is increasing (for example the limit for a single homeowner is increasing from $209,000 to $250,000); for more information on current and future assets test limits visit https://www.humanservices.gov.au/customer/enablers/assets#assetstestlimits

• Taper rate
When the changes come into effect the taper rate will change - this means that the pension reduction for assets over the test free area will increase from $1.50 per fortnight for every $1,000 over the test free area to $3 per fortnight for every $1,000 over the test free area

Key points of note:

• The changes only affect part pensioners. Those on a full pension are not affected.
• These changes will only affect people who have significant assets, other than their homes.
• People who no longer receive the pension as a result of these changes will be automatically issued with a Health Care Card and those over Age Pension age will also be issued with a Commonwealth Seniors Health Card, without having to meet the usual income test requirements.
• The pension will continue to be indexed each year and the family home will still be excluded as an asset when calculating entitlements.

What happens next:

If the assets test changes are going to result in a reduction in your pension you will receive a letter from the department of human services. If the changes will result in an increase in your payments this will happen automatically.

Where to get more information:

For more information on these changes and whether they will affect you visit the Department of Human Services website at www.humanservices.gov.au/rebalanceassets (this page includes an assets test estimator if you wish to estimate how the changes may impact your pension) - or, click here to read the rebalance assets factsheet.