Age pension – New Year winners and losers

In a couple of weeks, many Australians will receive a belated Christmas present from the Australian Government: their loss of
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Changes to the pension are set to hit in January next year.

In a couple of weeks, many Australians will receive a belated Christmas present from the Australian Government: their loss of entitlement to a part age pension.

They have been too successful during their working life, in this government’s eyes, and joined an elite group of Australians deemed rich enough to supply their own retirement notwithstanding they have paid their taxes and their dues, not bummed of the public purse, not received handouts all their lives, and purchased their homes with often ridiculously high interest rates.

These great Australians must be sitting at home wondering what they have done wrong and why they have been deserted by their government. The age of entitlement we are told has ceased, but these people never asked for entitlements. Something is seriously wrong when, if the age of entitlement is over, there are now more Australians (not pensioners) receiving handouts and benefits today than ever before. Both statements can not be true, so someone is not telling the truth.

So what have these poor Australians lost in real terms and who are the winners and losers?

Come January 2017, a couple with current assets of $816,000 will loose $14,001 in part age pension entitlement and become zero rated, receiving no part age pension at all.

That is a lot of money to loose particularly if your future budget already takes that amount into consideration. It is more than just a couple of coffees being lost. Somehow that loss will have to be made up from available assets, which is not easy to do when interest rates are at an all-time low.

A couple with current assets of $1,000,000, come January 2017, loose $6825 in part age pension entitlements and become zero rated, receiving no part age pension at all. Again a lot of money to be recouped from assets.

With current assets of approximately $1,175,000, the loss of a part age pension would be zero with that the figure being the cut off point prior to January 2017. If you are lucky enough to have assets of $1,175,000 reducing them to below $816,000 just so you could obtain a part age pension would be a bit over the top and foolish anyway.

As can be seen, those with assets around $816,000 lose more in real terms than anyone else, while at the same time having less assets with which to take up the slack.

They will have no choice but to supplement from current assets to fill the gap. If you’re doing this, just make sure Centrelink is advised of any changes in current assets done to obtain a raise in part age pension.

Those who receive a windfall and gain an increase in the part age pension are those with assets between $375,000 and approximately $457,000. At $375,000 you can expect approximately $1779 extra per year. With current assets of approximately $400,000 you can expect approximately $2223 extra per annum.

With current assets of approximately $457,000, the increase would be zero and any amount above that figure would reduce the part pension by $3.00 for every $1000 over.

The amount of increase will vary depending on the value of your assets, but the biggest winners are those with assets between approximately $276,000 and $375,000 as they will now receive the full pension.

An increase or loss situation is easy to work out by going to the Centrelink calculator, which is very good and simple to use. The above figures are for a couple owning a property. For singles, the same is happening, but the figures vary.

In summary, any age pensioner with current assets up to approximately $457,000 will get an increase in age pension or part age pension. Above approximately $475,000 and under $816,000 you will loose money. With current assets above $816,000, you will receive nothing by way of part age pension; entitlement is lost.

Good luck to all those affected adversely by the changes and I trust you have updated your situation accordingly. I am pleased for those with minimum assets who have had their situation increased to a full pension or higher part age pension as many have been finding it very hard.

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Have you established how you will be affected? What changes do you think you will have to make to your day to day life style?

  1. Guy Flavell  

    Paul, retirees can earn up to $58,000 pa without paying ONE CENT in taxation.
    My 31 yo, non-home owning son earns exactly $58,000 pa and pays $10597 pa in taxation.
    It just seems a tad inequitable to me.
    A home-owning retiree with $816,000 in investment funds can still earn around $41,000 pa tax
    free based on say an average return of 5% over a ten year period … and they can still enjoy most of
    the Government health benefits too.
    Don’t get me wrong though. I greatly admire retirees who have diligently planned and saved for their retirements and they should all be extremely proud to not be accepting Government welfare.
    But Paul, they are NOT doing it tough and should not be whinging one iota about their incomes.

    • Kerri moore  

      If you have $816,000 in assets you probably have some of those assets which do not earn anything like your car caravan furniture etc what are you supposed to do sell everything so you can get a bit more to live on $816,000 @3% is about $24,000 pa a lot less than the pension so we have to draw down the capital and then go back to Centerlink for the pension this is going to come back and bite them on their bums

    • Lesley Croft  

      Guy I am a pensioner and am still doing it tough and have done so all all my working life as have many others like us – don’t tell us about doing it tough and at our time of life we should be able to. We’ve worked and paid taxes too just like your son and struggled so I think your comment is a bit off.

    • SamR  

      The pensioners who are losing the part pension retired in good faith and planned their retirement accordingly.

      The govt changed the rules and targeted them because they were an easy target. Too poor for the Liberals to care about and too rich for Labor.

      The Liberals say the “age of entitlement is over” except the politician who said that, retired on a huge pension he did not pay for then DOUBLE DIPPED into another very high paying govt job.

      Fair?

      • Dee  

        Being one of those affected by the above changes, I can tell you, I’m not happy. I’m wondering why I bothered to work those extra years when I could’ve relaxed, enjoyed better health and a younger person would be grateful for my job. (and indeed was!) As Sam (above) says, I had planned my retirement according to the rules in place at the time. Now I really wish I’d bought a better house and kept that as a nest egg. The government doesn’t reward those who work hard……that’s the message I get and it makes me furious. As Kerri (above) says, it will come back to bite them. Many will take overseas holidays and go on a spending spree just because they feel cheated. If our politicians showed any signs of cutting back on their own extravagances or started to find savings where they should be found, it wouldn’t be such a bitter pill to swallow. I am fully aware that we are very fortunate in this country but this government has chosen to punish its hardest workers. (which is supposedly against their “liberal” ethic.) No wonder the polls are slumping!

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