Sponsored Bracing for impact: what to do if you’re affected by pension changes
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Bracing for impact: what to do if you’re affected by pension changes

A new Assets Test means pensioners will be missing out. Photo Getty
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From January 1, 2017, a new, tighter assets test applies to the Age Pension.

This means the value of assets you can have and still get a part Age Pension will be lowered.

The move means an estimated 300,000 retirees will lose some of their part Age Pensions, and around 100,000 will lose their pensions entirely.

In essence, pensioners will lose $3 per fortnight for every $1000 their assets are above the lower threshold, up from $1.50 per fortnight.

On the plus side though, approximately 50,000 previously ineligible Australians will receive the full pension under the changes.

And in one more bright spot, those who do lose their Age Pension as a result of the changes, will automatically be eligible for a Commonwealth senior’s health card or a low income health card, giving them access to the likes of Medicare bulk billing and cheaper medicines.

FULL PENSION

PART PENSION

If you’re one of the 300,000 affected, there’s a few steps you can take to minimise the impact of this change.

Your home is not included in the assets test, so if you’re considering spending some of your money on renovating to make it more comfortable for your retirement years, you can go right ahead without worrying it will affect your pension.

Using your savings to put in a swimming pool or update your kitchen or bathroom may make sense in both financial and quality-of-life terms.

An effective way of reducing your assets, if you wanted to gift some money to your children or a relative, is a strategy called gifting. Everybody can give away $10,000 per year, up to $30,000 in five financial years. Any more than this and the tax office will still consider the value of what you have given away – or sold at a discounted rate – to be part of your assets.

Your children or grandchildren would appreciate your gifting strategy
Your children or grandchildren would appreciate your gifting strategy.

Another option open to some is that of making contributions to a spouse’s super. Currently, if your spouse is not working, or earns $10,800 or less you can boost their super by a minimum of $3000 and enjoy an 18 per cent tax offset on up to $3000 of your contribution.

From July 2017, your spouse can earn up to $37,000 and you will still be eligible for this tax concession.

But if you’ve done the sums, and despite making the most of asset reduction options, you still feel these changes will leave you with less income than you had hoped to retire with, you may also want to consider a transition to retirement strategy.

This allows you to keep working, either full-time or on reduced hours, while drawing a pension from your super fund, and continuing to add to your super through your own and employer contributions.

It’s open to anyone who has hit preservation age, usually 55, and can also be used post-retirement to supplement the Age Pension. Your super continues to be invested even while you draw down on it for a regular income.


Keep your super invested when you retire and grow your income.
Turn your super into an income stream when you retire and you can receive a regular income to top up the Age Pension, while the balance stays invested.

Everything you need to know is at industrysuper.com.