10 November 2016 by Aon Hewitt
Some important changes have recently been announced regarding the Age Pension from Centrelink, which may affect your eligibility and payments from 1 January 2017. While some will newly qualify for the Age Pension or see an increase in their payments, many pensioners may find their Age Pension entitlement reduced or even cancelled completely.
The actual impact of these changes will depend on your relationship status, homeowner status and whether you are currently asset tested or income tested.
Changes from 1 January 2017
There are two changes occurring:
- A change in the taper rate for the assets test, which determines how much Age Pension you will receive – currently for every $1,000 above the lower asset threshold, your Age Pension reduces by $1.50 per fortnight for a single person or a couple combined. This will change to $3.00 per $1,000, meaning that your Age Pension will reduce at a faster rate after 1 January 2017.
- Changes to the asset test thresholds – both the lower and upper asset thresholds will change, as set out in the table below. An increase to the lower asset threshold will mean that more people will potentially qualify for the full Age Pension. However, because of the change in the taper rate, the upper asset threshold will reduce significantly, limiting the number of people who will now qualify for the Age Pension.
Assets test thresholds
|Relationship||Single||Lower asset threshold||Upper asset threshold|
|Current||1 January 2017||Current||1 January 2017|
Will you be affected?
If you are currently receiving the full Age Pension, you will not be impacted by these changes and will continue to receive the full Age Pension.
If your Age Pension is determined by the assets test and you have assessable assets below the new lower asset threshold from 1 January 2017, your Age Pension will increase. For example, if you are a couple who are homeowners and you currently have $350,000 in assessed assets, under the updated assets test your Age Pension entitlement would increase from a part Age Pension to the full Age Pension.
If your Age Pension is determined by the assets test and you have assets slightly higher than the new lower asset threshold, your age Pension may increase.
However, if your assets are significantly above the lower limit, your Age Pension will be reduced or stopped altogether.
Prepare yourself for the changes
It pays to be well informed about the changes to your Age Pension eligibility and payments. We recommend the following steps in order to ensure that you receive the correct payments that you are entitled to, and to proactively address any potential impacts to your financial situation:
Determine if your Age Pension payment will be affected as a result of the Centrelink Asset Test changes from 1 January 2017:
- contact Centrelink via phone, in person or login to my.gov.au to obtain your financial details which are currently on record with Centrelink
- compare these numbers with the current value of your assets and update Centrelink if necessary.
Contact your financial adviser to discuss:
- if your Age Pension will change and by how much
- alternative strategies to reduce your level of assets and potentially increase your Age Pension
- options available to you to minimise the effects on your income as a result of a reduction to the Age Pension.
Start a conversation with us
If you need help understanding how changes to the Age Pension may affect you or for support with strategies to help achieve your financial goals, please contact us today.