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The Federal Government has announced changes to the Age Pension assets test, which will take effect on 1 January 2017. This means your pension entitlements could either go up or down as a result.
The reason for the changes is to create a fairer balance between the assets you have and the social security benefits you’re entitled to. But if the Age Pension is your main source of retirement income, any change to the amount you receive could have a major impact on your retirement lifestyle. That’s why it’s important to plan ahead, so you’ll be ready for the changes when they happen.
The assets test uses an upper and lower threshold to work out whether you’re eligible to receive a full Age Pension, a part Age Pension, or none at all. Different thresholds are used, depending on whether you’re a single person or a couple, and whether or not you own your own home. On 1 January 2017, each of the thresholds will either go up or down.
Here’s how the thresholds work, if the total value of your assets is:
As a result of these changes, some people currently receiving a part Age Pension will lose their entitlement from 1 January 2017. If this happens to you, the government will automatically issue you with both a Health Care Card and the Commonwealth Seniors Health Card if you’re over the pension age.
Changes to the assets test thresholds
Here’s how the upper and lower thresholds will change on 1 January 2017.
|Lower threshold||Upper threshold|
|Now||From 1 January 2017||Now||From 1 January 2017|
Source: Australian Government Department of Human Services
How you can reduce your assessable assets
If the threshold changes are likely to have a negative impact on your retirement income, it’s a good idea to start planning now so you’re ready when 1 January rolls around. That may mean looking at ways to lower the value of your assessable assets. Here are some options:
Get help from an expert
When you're relying on the Age Pension to fund your retirement, every dollar you lose from your entitlement could have a big impact on your standard of living. But it can also be difficult to know exactly how the changes will affect you, and whether you’re making the best possible financial decisions.
That’s why it’s worth speaking to a financial adviser. By talking through your options and making any adjustments to your financial strategy before the changes happen, your adviser will help ensure you can still meet your retirement goals.
1 The Funeral Bond Allowable Limit is indexed in line with CPI pension increases every 1 July.