Assets test changes – adviser toolkit

It’s just under a year until changes to the asset test threshold are set to shake up how much your clients receive from their pensioner entitlements.

With such a significant change on the way, it’s important to prepare yourself – and your clients – early. To help, we’ve put together an information pack with cases studies and all the facts you need to develop the right strategies for your clients.

To receive your copy of the IOOF TechConnect adviser toolkit on Asset Test changes coming 1 January 2017, please contact your local IOOF representative.

What are the changes?

There are two main ways your clients’ age pension payments may change.

The first is the increase in assets your clients may have and still qualify for the full age pension. These changes are as laid out in the table below:


Assets test thresholds
Current (September 2015)

Assets test thresholds
From 1 January 2017

Homeowner - single $205,500 $250,000
Homeowner – couple $291,500 $375,000
Non-homeowner – single $354,500 $450,000
Non-homeowner – couple $440,500 $575,000

However, while this may be good news for your clients, these changes also come with an increase in the taper rate.

Taper rate changes

The increase in the taper rate means that when your clients reach the assets test thresholds in the table above, they will lose their full age pension faster.

Currently your clients lose $1.50 in their pension for every $1,000 in assets they have above the current limits.

From 1 January 2017 clients will lose $3.00 in their pension for every $1,000 they have above the new limits.

Winners and losers

Generally speaking, the changes are a win for clients with assets up to and around the new assets test threshold. However those with higher assets will see their pension diminish faster, and cut out completely at lower levels.


Part-pension cut-offs
Current (Sept 2015)
Part-pension cut offs
From 1 January 2017*
Homeowner - single $783,500 $539,000
Homeowner – couple $1,163,000 $810,000

* Please note the actual pension cut-offs may be slightly higher as a result of any indexation to the Age Pension between now and 1 January 2017.

Case study 1

Bob, 67, is a widower who has paid off his house and has a nest-egg of $275,000 from a lifetime of working and his wife’s life insurance. Currently he receives $762.75 per fortnight, however this will increase to $790.14 per fortnight from 1 January 2017. Further, his benefit will be income-tested as a result of his investments, rather than assets tested.

Case study 2

Susan and Bruce are in their early 70’s. They are home owners and have investments in the stock market worth $750,000 to support their retirement. Currently they receive $619.25 per fortnight in the part-pension, however this will fall to $182.00 per fortnight.

Things to think about:

  • For residents in residential/ home care, receiving lower or no age pension could translate to lower care fees.
  • Is there any effect from the changes on the Pensioner Bonus Scheme?
  • Your clients who lose their pension entitlement on 1 January 2017 as a result of the changes will be automatically issued with a Commonwealth Seniors Health Card. Note some benefits provided by the Age Pension may not be replaced by the Commonwealth Seniors Health Card, such as discounts provided by state bodies or private corporates. For example, the vehicle registration concession in New South Wales requires persons to have a Pensioner Concession Card or DVA Gold Card.

Important
The information contained in this newsletter is provided on behalf of the IOOF group of companies and is intended for financial adviser use only. It is given in good faith and has been prepared based on information that is believed to be accurate and reliable at the time of publication. Any examples are for illustration purposes only and are based on the continuance of present laws and our interpretation of them at the time.