How can you minimise the impact of new Age Pension asset tests in coming years?
Presently, an average of around one thousand Australians retire each week. In six years’ time, this is projected to increase to an average of about five thousand Australians retiring each week. Of these retirees, 75% are on some level of government support and life expectancy is twenty-odd years after reaching retirement age.
So the question is, with an increasing population base due to retire in coming years, will the status quo remain, or will further legislation changes take place? Recently approved measures by the Federal Government for the Age Pension are likely to be just the beginning. However, time will tell whether the maximum asset test limit continues to drop, and whether further changes are likely to be implemented.
Over the past few years, the government has had a hard time getting pretty much anything passed through parliament. Yet recent amendments to the Age Pension were all introduced and approved within about a month, with the changes expected to be rolled out from January 2017.
So what can you do if you have discovered you’re about to lose your Age Pension payments due to the new asset test limits? Here are a couple of suggestions.
Firstly, if you are a couple and one of you has qualified for the Age Pension but the other has not quite reached the age limit requirements, there is the opportunity to push some cash/capital into the younger partner’s super fund. By doing this and leaving their super fund in accumulation mode, essentially you can delay these assets from being accessed by Centrelink for the asset test. Of course, once the younger partner reaches the Age Pension range, this shield tactic is lost and everything is back on the table, but it might provide some short-term relief.
Another option is if you are sitting close to the revised limits, you might want to spend a little on home improvements. Not only does this hopefully improve your home’s value if you ever have to sell the property, it also reduces the cash that might be accessed by Centrelink. If you are already receiving the Age Pension, you might be aware your home is presently exempted from the asset test. However, the legislation is incredibly complicated and it can be difficult to know which way to go with each of these changes to ensure you are positioned as favourably as possible in the coming years.
Please also remember that before embarking on any strategies regarding the Age Pension, you should always seek professional guidance from a licensed financial planner. Of course, I recommend AJ Financial Planning.