Money

Pension changes FAQ

Dec 11, 2014

1^st January 2015 Pension Changes FAQ

The upcoming changes in January to the way in which the Age Pension is assessed have definitely caused some confusion. With the deadline only weeks away, it’s important to know where you stand so you can plan accordingly for any change to your circumstances.

After receiving dozens of questions from the public, I’ve compiled a list of those most frequently asked on what is a tricky subject…even for the so-called experts!

Here it goes…

Q1 – I’m retired and have some funds in super and I am not drawing a pension. I don’t receive any payments from Centrelink and I don’t qualify for the Age Pension until after January 2015. Can I transfer my super into an account-based pension now so that it can be assessed under the current, more favourable rules?

The short answer is no. The ‘grandfathering’ (i.e. passing-on of existing rules) only applies to those currently receiving a Centrelink income support payment (pension or allowance) with an account-based pension product as at 1^st January 2015.

For those who are granted a pension or an allowance with a super pension product after 1^st January 2015 the assessment will be made under the new rules.

Q2 – I’m an Age Pensioner with one of these account-based pension products. I may want to add some funds to this account next year. Do I still keep the same grandfathering treatment?

I’m afraid not. Adding new funds to an existing account-based pension after 1^st January 2015 would impact upon its grandfathering treatment. The pension account would be restarted with a new commencement date, once new funds were added.

This highlights the need to get professional advice before making changes to your super pension account.

Q3 – I’m not happy with my current super pension provider and I want to change to a new fund. If I keep all the same payments and details, can I change my super provider after January and still keep the grandfathering treatment?

Again, the answer is no. A move to a new provider would lose the grandfathering arrangements and trigger a fresh assessment under the new rules. This could be bad news and potentially cost you a decrease in your Age Pension, depending on your situation.

This may make for a tricky situation in some cases. For instance, if the performance of your super fund isn’t up to scratch, you can either stay put and cop the sub-par performance, or change super provider and potentially cost yourself some Age Pension.

Q4 – I have a low income health care card that doesn’t expire until late next year. If I’m not entitled to the card under the new rules in January, can I still keep my card until the expiry date on the card?

Not necessarily. With the changes to rules on 1^st January 2015, all super income streams will be deemed from this date.

This means that people could start to have their cards cancelled within the first couple of weeks of the new year. Because this card is based on the last eight weeks of assessable income, you should know within a couple of months if you get to keep the card to the expiry date.

Q5 – If you’re a couple with each person having an account-based pension and one partner is an Age Pensioner but the other is yet to reach pension age, do both of your super pension accounts get the benefit of grandfathering?

You cannot rely on your partner to meet the rules. Both partners need to meet the grandfathering rules in their own right.

For example:

husband receives the Age Pension
wife is under Age Pension age and not in receipt of government support
each has an existing account-based pension
when the wife turns 65, she cannot claim that her account-based pension is also grandfathered as she was not on income support prior to January 2015.

Confused? You’re not alone. There are likely to be many more scenarios where people are affected. I’ve outlined just a handful. Please share your thoughts below.