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?
From this month 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 million come January 2017, loose $6,825 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 million, 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 million 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 $2,223 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.
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?
This piece was originally published on Starts at 60 as ‘Age Pension — New Year winners and losers’. It was one of our most popular contributions by the Starts at 60 community in 2016.
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