By now you’re sure to be well versed in the changes to the age pension.
For those out of the loop, here’s a quick recap.
From January 1, more than 300,000 age pensioners will lose all or part of their pensions.
This is because the government has changed how many dollars’ worth of assets you can have before your pension if affected.
Under the new reforms, the assets test threshold has been cut from $1.17 million in assets for couples down to $816,000.
If you’re a single pensioner, you’ll lose your payments if your assets are worth $542,500 or more.
If you’re one of those affected by the changes, there are things you can do to get yourself below the threshold.
One of the options you have is to invest your money into assets that aren’t means tested for the pension.
That’s right, there are several assets you can have that won’t affect your pension.
Dixon Advisory’s Nerida Cole points to two main assets you can put your money into.
“There are two main assets that will give you the most room in terms of the amount of money they can remove from the assessment,” she said.
“The first one is your principal home, which is excluded from the assets test.”
“When the changes were first announced, there was a lot of talk about people upgrading their homes.”
The upgrades can include maintenance and renovations, which in turn can increase the value of your property.
But before you do, you should think about whether the renovations or upgrades you’re planning are a worthwhile investment.
“You should be careful not to over capitalise by spending too much on the property,” Cole advises.
“Your investment might not add value over the long term and can even cost you, if you invest in things such as putting in a swimming pool.”
Your second main option for assets is useful if you have a spouse or partner who is under the retirement age.
Cole advises you can actually move some money to your younger spouses super accumulation account.
“That is subject to the room they have left in their super account when it comes to contribution limits,” she said.
“You can leave the money in your spouse’s super accumulation account until they are eligible for the age pension and you’re assessed as a couple.”
If neither of these options suit you, there are a few smaller alternatives that may help those who fall just above the assets test threshold.
Gifting and funeral bonds can come in handy if you’re a few thousand dollars over the assets test threshold.
Cole said gifting is an option, particularly if you have adult children.
“Gifting can be an easy way to bring yourself back into pension eligibility,” she said.
“Be aware that the maximum limit you can gift is $10,000 per year or $30,000 over a five-year period.”
Like anything involving money, there are some things you should be aware of before you go handing out money.
“The thing to be very careful of with this strategy, is that you can’t assume your adult child will give it back if you ask and you have no legal recourse for money you’ve chosen to give away” Cole said.
“If you end up short down the track, it’s really up to the good faith of your child to give that money back, but if they’re having a hard time financially, they may not be able to.”
“This can certainly add additional stress, particularly if it causes a breakdown in your relationship with your family.”
What about funeral bonds?
Well, a funeral bond is essentially a way of putting money away to pay for your funeral.
Cole said the government allows you to have a set amount of money invested in funeral bonds.
‘This is a good option if you’re only a little bit over the asset threshold for the age pension,” she said.
“But be careful, as money invested in a funeral bond is locked away and won’t be available to help you with cost of living or medical needs.”
According to the Department of Human Services website, the Funeral Bond Allowable Limit is $12,500 and is indexed in line with CPI pension increases each year on July 1.
It’s important you tell Centrelink about the funeral bonds you own.
Among the information you’ll need to provide is how much has been invested by you into the funeral bonds and whether it is a joint bond.
You’ll also need to let Centrelink know if you make any additional payments or instalments to the bond, invest in another bond or if a joint owner of the bond dies.
The whole issue of the changes to the age pension can be very complicated, particularly where your assets are concerned.
Cole suggests you seek the advice of a financial planner or speak to Centrelink about attending one of their free seminars to get all the information you need.