Get ahead of age pension changes
FINANCE TALK with Suncorp Bank senior economist Darryl Conroy
WITH the festive season now upon us and less than a month to go until the new year, it's an ideal time to look at how confirmed legislative changes could influence your eligibility to the age pension in 2017.
One of the biggest changes we will see is adjustments to Australia's Age Pension asset test, which are set to take effect from January 1.
On the surface, the changes are relatively straightforward, with asset thresholds increasing for those eligible for the full pension. However, others may find they lose their benefits entirely.
The table here outlines the changes designed to help the Federal Government achieve forecast savings of about $2.4 billion.
Previously, the aged pension reduced at the rate of $1.50 for every $1000 in assets above the limit, but this will double to $3 from January.
This has effectively reduced the cut-out limits for the part pension.
Under the new thresholds, the part pension cuts out for a couple with a home at $816,000 - down from $1,178,500 (a 31% drop).
By reducing the pension for those with higher asset balances, the government is able to lift the thresholds for those with less assets.
The new test will capture a broad asset base including property (excluding the home), financial investments, motor vehicles (including boats and caravans), superannuation (if over pension age), business and household assets.
The dilemma for retirees is the difficulty in supplementing their income once they have retired, as well as historically low interest rates which are providing an ongoing challenge.
While some may be tempted to spend big on holidays and the like to qualify for the pension, this puts them at great risk of eroding their capital base.
Some spending such as gifting and home improvements might help, but please ensure you discuss appropriate strategies with your financial adviser.
For all your banking needs, visit your nearest Suncorp Bank branch or phone 131175.