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Recent age pension changes impact non pensioners too

The age pension has recently gone up because of the rising cost of living. It’s great to see the increase but along with keeping on top of rising costs, there are now additional challenges and opportunities. 

It’s also worth thinking about how the pension increase changes how much you could borrow against the equity in your own home via the federal government’s reverse mortgage scheme.

Here’s our guide on how the changes could impact you.

Which retiree are you?

All age pension eligible Australians fit into a category based on their assets, their relationship status, and whether they have a home or not. In the table below, a green band means full rate pension, red means no pension at all, and like a traffic light, amber is somewhere in-between.

Recent changes in the age pension mean you may have changed category and if this is the case, you may have work to do. Where do you fit in?

What should you be doing now?

Below is our action plan. It all depends on what type of pensioner you are, but many people should consider making the best of the changes.

Check if you are a full-rate pensioner

Check your fortnightly pension to make sure you are receiving the maximum. If you think you are a full-rate age pensioner, and you are not getting the full-rate in the table below, you may need to update information held with Services Australia.

Part-pensioners: make sure your information is up-to-date

If your rate of pension is less than the rates in the table above, you are a ‘part-pensioner’. The assessable assets reduce the amount of age pension you get by a formula. For every $10,000 worth of assets over a set limit, pensions are reduced by $780 per year.

It's worth checking that the correct value is on file for your car or caravan (current value not new), and any changes in the value of your savings and investments.

More people can get the age pension and the Pensioner Concession Card

The upper limit for someone to receive a part pension (i.e., to not be assessed to get the full rate, but any amount greater than zero) is now higher.

This is good news for people close to the limits who have been eyeing off the benefits of having a Pensioner Concession Card, as this can be much higher than the actual amount of age pension received.

Every age pensioner receives a Pensioner Concession Card.

You can now borrow more with the Home Equity Access Scheme

Homeowners can borrow against their property using a government-run reverse mortgage scheme known as the Home Equity Access Scheme.

The amount you can borrow is linked to the maximum rate of the age pension, so the recent increase means the amount that can be borrowed has also increased.

It is government run, and at 3.95 %, the current interest rate sits well below other reverse mortgage rates in the market. Of course, this could change, but for now the scheme looks attractive.

You can access the loan even if your income and assets mean you are not eligible for an age pension. This can be useful if your assets don't generate enough income.

Aged care costs are increasing

The rules around aged care are complex, and the impacted of the pension changes on you will depend on your financial situation and the aged care decisions you make.

With higher cost of living comes higher interest rates, and these rates are part of the cost of aged care. The cost of paying for residential aged care accommodation by a daily payment instead of a lump sum has become more expensive.

Furthermore, the daily fee all residents pay is based on the rate of age pension. So that has gone up too. 

There’s no need to worry or panic about these changes. But it is important to understand how they impact on your situation, for better or worse.

 

Brendan Ryan is a financial adviser and Founder of Later Life Advice. This article is for general information purposes only and does not consider the circumstances of any person. To find out more about your action plan visit our website.

 

24 Comments
Peter K
June 11, 2023

Totally with you Pete. My Dad went through all the awful stages described above, and it sometimes takes a force of will to remember him as the intelligent, hard-working, caring and successful man he was for most of his life. Mum now the same age has terminal pancreatic cancer, is still at home with in-home care and with her usual clarity, dignity and courage, has applied for VAD, legal here in WA.

Maurice
May 22, 2023

Why does Centrelink assess my share portfolio at market value without allowing for capital gains tax liability ?

SMSF Trustee
May 24, 2023

I'd suggest two main reasons.
1) they don't know your tax situation so aren't in a position to calculate how much capital gains tax you'd pay if you liquidated your shares today;
More importantly
2) the dividends you get paid aren't reduced to take account of the tax you'd pay which you seem to think means you don't really own as many shares.. Since the main reason for including assets in Centrelink tests is to allow for income that is or could be earned on those assets, it's the full pre-tax value that matters.

John
May 08, 2023

Thank you Brendan for this article. Could you please give consideration to doing one on the income eligibility for the aged pension. Especially in relation to eligibility for people that continue to work and earn less that the income cut-off figure.

I recently retired form work at 70 years old and am on 12 months Recreation Leave/Long Service Leave at half pay. By investigating I found that since I had reached retirement age I was eligible for a part pension payment as my assets are below the $954,000 cut-off figure.

Because I had an SMSF I found it hard to research as neither the Centrelink website or the local Centrelink staff had any information/idea on how to include it in the assessment or to review the changes in value (invested mainly in shares). I also found that I could previously have been in full-time employment on a wage less than $92,144pa (current figure) and received a part pension since I was 65 years old.

Research taught me not to tell CentrelinkI had finished work and was on Long Service Leave but that I was still in paid employment, otherwise I would miss out on some income benefits.

By advising Centrelink of my employer details a copy of my fortnight pay slip is downloaded direct by Centrelink and I am requested to confirm the figure online on the due date. Centrelink then advises me what part-payment amount I am entitled to that fortnight.

When discussing eligibility for a part pension with others I worked with it surprised me how many people over pension eligibility age, and still working, that would be entitled to a part pension but had no idea. Some had retired husbands that simply hated going into Centrelink.

Lee Develyn
May 11, 2023

Good Afternoon John, One of my clients forwarded the link of Brendan's article and I continued on to read the comments. It is a shame that you were unaware of possible entitlements to a part age pension once pensionable age and still working. At the moment if you were granted an age pension - this is how it would work for you; re: assessable assets - if your SMSF is in accumulation stage it will be the value only and the EOY financials would need to be supplied to Centrelink for assessment (net assets is the figure Centrelink will base the value of the SMSF on). Re: working, Centrelink will base you and your partners gross income + any deductions from the gross ie: employee additional contributions to super pre-tax or allowances etc, THEN they will add to this amount your deemed income from your financial investments, then deduct the allowable income (couple $336 or single $190) then deduct the work bonus $300 per fortnight (if you can claim and be granted the Age Pension prior to end of December 2023 - you will also have the additional $4K work bonus deducted from your gross income). 

Graham Wright
May 07, 2023

All these laudable thoughts on end of life. They count for nothing as you approach the time. Nature determines your last breath unless you cheat by suiciding. It is grossly unfair to ask any living soul to end your life for you, more so when you cannot do it for yourself. You do not usually have a choice how or when you die so entering that vegetative, loss of capacity you dread so much is not a choice but a part of the natural process. Medicos, family and friends can help make this natural process as comfortable as possible, but in fighting against it, you will make it harder for them and most miserable for yourself. So be grateful for yourself, fill your life with love and friends, think well for and of others and you will die comfortably, loved and surrounded by family and friends.

Dudley
May 06, 2023

Commonwealth Seniors Health Card (CSHC) calculator:
https://pensionhelp.com.au/commonwealth-seniors-health-card-cshc-calculator/

Couple, not separated, not caring for children, adjusted taxable income $59,566 (tax free threshold), super disbursement ('pension') accounts <= $3,835,822: Eligible = yes.

Ash
May 06, 2023

Why cant a single have nearly a million dollars and still get some pension. It is discrimination... And damnation. People are stating that they dont want to be a burden on society... Well offs in some cases are.

Sue
May 06, 2023

I agree. I’ve told my family if I get to the point where I don’t recognise them l’m already gone. I have no wish to be a burden on them or society.

Brian Christopher
May 06, 2023

Moneys no good to you once you die so I say get a reverse mortgage and live it up and that way there won’t be any relatives fighting over money later

John
May 07, 2023

No point being the richest person in the cemetery.

Hanisha
May 09, 2023

Love this

Andrew
May 06, 2023

Using the figures above of $780 lost per $10k over the full pension asset test tells me this... unless your rateable assets are earning 7.8% or better then you're better off hiding money in Vegemite jars. Some may say super funds can produce better than this in good years. True, but unless you sell the car, caravan ie; convert assets to cash then 7.8% will never be realised nor guaranteed. When was the last time a standard bank account offered 7.8%?

Vicky
May 05, 2023

Government control on who should live and who should survive just because you are nearing the end of your life is a horrible idea. No one should die because they haven't enough money.

John Keam
May 04, 2023

Thank you for this article it has cleared up a lot of items I was confused about although I still have some confusion especially about Down Sizing
Than You
John Kean

Peter
May 04, 2023

I think when you are nearing your use by date, the government should offer you an option to end your life. Who wants to be a expensive burden and still not have a quality life. I have seen both of my parents in age care, it is depressing, pitiful and it is not something which I want for myself

Bakker
May 04, 2023

Well said..just give us the options and we make the call based on indervisual circumstances

Leon
May 04, 2023

Amen. Couldn’t agree more

John Dakin
May 04, 2023

Entirely agree, Peter. I have no wish for my children and grandchildren to have a lasting memory of me as a physical and mental wreck, and the prospect of being a (very expensive!) prisoner in an aged care home is depressing in the extreme

Deb
May 05, 2023

I agree.

Robert
May 05, 2023

Totally agree i have witnessed many family members over the years suffer. when we reach this point we should be the ones who when in good health can implement documents to say when i want my life to end with dignity you just have to look at the stress families go through its cruel for all involved.

Tina
May 06, 2023

I believe you are right. I would opt for quality of life once I reach that point (use by date).

Brian Richards
May 07, 2023

I agree wholeheartedly, it is not a crime to commit suicide but it is a crime to provide the means to have a sensible suicide. Many methods are messy, painful, and importantly create trauma for loved ones whilst a sensible outcome would be to discuss the end with loved ones and have a sensible, manageable end. We can of course go to a number of european countries where euthanasia is allowed but at significant cost and generally die alone with most loved ones able to be there.

Ruth
May 11, 2023

Totally agree Peter. They call it 'caring'. It's not. I want cognitive tests done on myself privately and the ability to organise my affairs and die with dignity at the time of my choosing. My mother is is misery in aged care and just wants to go home to die. I want to be holding her hand when it happens.

 

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