13 Dec Beware the Age Pension Grinch!
The Grinch is associated with Christmas and for many retirees receiving a partial age pension the changes to social security eligibility assessment that take effect on 1st January 2017 may make it feel like he is paying retirees a visit this year! Centrelink has already been mailing out assessment notices so this year’s you might get a nasty surprise along with your Christmas greeting cards this year!
The changes to the age pension assessment are quite substantial. The maximum assets you are allowed to own and still have access to a part-pension has decreased by approximately 30%. This article from our business partners Aon details the changes and so you can understand the wider implications without them being restated.
The loss of an age pension under the changes has major implications for income in retirement but it may also present further implications for those in aged care. The assessment of daily charges paid for aged care is much lower for those who receive the age pension. The loss of access to the age pension means that the daily rate charges will increase, and potentially by a lot!
However, before you pack away the Christmas prawns and turkey and consider the prospects of canned ham and beans for the festive meal, now is a good time to look at some strategies to keep the Centrelink Grinch from ruining your retirement plans.
Firstly, it is important to consider whether your strategy has considered and optimised your holdings of assets that are not counted. Your adviser can work with you to decide whether the strategies noted below are appropriate for you:
- Accommodation bond paid for aged care;
- Superannuation/rollover investments;
- Improvements and maintenance of the family home;
- Special disability trusts;
- Gifted assets up to the yearly and five year limits; and
- Funeral bonds and prepaid funerals
Further, Centrelink’s record keeping is not always accurate and they may still have record of assets that you no longer own or have incorrectly recorded the value of the asset (it’s amazing what an extra zero can do!). Speaking with an adviser familiar with the assessment process and who can check your entitlements will ensure that Centrelink haven’t disadvantaged you.
If, even after looking at these options, your financial position is such that the Centrelink Grinch reduces or steals your age pension, the next important step to consider is whether you have structured those assets to provide the best outcome for your present and future income needs.
In the current market, holding your investments solely in cash and term deposits that are providing measly annual income returns is not going to help you meet your longer term retirement needs (though you may well get access to the age pension again faster).
Other retirees may also find that they are (at least according to Centrelink) asset rich and income poor. This is especially true of retirees holding a property portfolio and in this situation it is important to review your assets and determine an approach that will provide a higher income.
Finally, even if you lose the age pension, the legislators showed some compassion and although they won’t be arriving with any gold, frankincense or myrrh, all pensioners who have lost their age pensions due to the assets test are permanently eligible for the Commonwealth Seniors Health Care Card. This card comes with some associated benefits and provides substantial savings on ongoing pharmaceutical costs and government services.
The changes Centrelink eligibility assessments are aimed at keeping social security benefits only as safety net, for those that need it the most. We should expect further restrictions in the future as our population ages.
Whatever the changes are now and may be in the future, there are a number of strategies available and that we can help you implement to make sure that your retirement can be Grinch-free and enjoyed with turkey and the trimmings. Please, have a Merry Christmas and enjoy the Season!
If you want to discuss your options for these changes please contact our Financial Adviser Chris Kelly on 02 9633 5530 or by submitting a contact form