PENSIONERS NEED TO UNDERSTAND IMMINENT CHANGES TO THEIR INCOME
From January 1, many older Australian are going to feel the effects of the major changes being introduced by the Federal Government to the aged pension. These measures will also affect the means test assessment for aged care fee purposes.
It is predicted that more than 330,000 age pensioners will have their entitlements cut, with at least 100,000 losing all entitlements.
“There will definitely be a lot of people who will not have as much money in their wallets in 2017 as they did in 2016,” IMB Bank’s Financial Planning Practice Manager Rob Weston believes.
“It is not too late to review your investable assets and there are a few things you could look at doing to try and keep as much of your pension as you can.
“Try and restructure your assets to replace the income you will lose – talk to an accredited financial planner about how you can minimise the impact.”
Mr Weston believes that one of the key issues is that many pensioners simply don’t understand the changes and are therefore unprepared.
There are two major changes - the assets test threshold and the taper rate.
Firstly, a couple who owns their own home and has investable assets of more than $600,000, could have their age pension cut by up to $5714.
Worse still, if you own you own home and have investable assets of $816,000 or more, it is likely you will lose your pension altogether.
Secondly, the taper rate is changing. As it now stands, for every $1000 you have over the asset threshold, you lose $1.50 (75c for couples) per fortnight. Come January 1 2017, you will lose $3 per fortnight for every $1000 you have over the asset threshold. This means the Pension will reduce at a faster rate.
“There are certainly many pensioners who own their own home but also have funds in super and an investment property – these people are not necessarily wealthy but their pension will most certainly be cut down if not out under the new rules,” Mr Weston said.
IMB Bank undertook a survey in November of retirement aged people and 80% of respondents revealed they were not confident about how much they would need to retire nor how long the funds they had would last.
Another 60% said they were unaware of the initiatives the Governmenthas introduced to
encourage them to save for retirement.
“At a time when they should be enjoying their lives, many of our aged pensioners are confused and scared. They don’t understand the new legislation and they are worried about how they will make ends meet,” Mr Weston said.
For more information and to make an appointment, go to www.imb.com.au/pension