Maximise age pension entitlements by using Centrelink-friendly pensions
Under the 2006 Budget changes, the Centrelink assets test exemption for complying income streams will disappear from 20 September 2007. But if you get in before then, your income stream will keep its exemption and be favourably assessed by Centrelink.
19 September is coming up quickly so now is your last chance to take advantage of this window of opportunity.*
Make time now to review your financial situation with your adviser before time runs out.
To be eligible for the age pension you must be over a certain age (65 for men or 63 for women) and complete both an assets test and income test to determine your level of pension.
Of course the more assets you have and the more income you receive, the less pension you’re eligible for.
Currently some types of income streams such as term allocated pensions and complying annuities are eligible for a 50% assets test exemption. And if you purchase these income streams by 19 September this year you will continue receiving the assets test exemption. But if you purchase them after 19 September they will be fully assessable.
So if you want your income stream to receive the 50% assets test exemption, you better act now.
On 20 September, changes to the assets test will also mean more people are eligible for the age pension. Under the current rules, for every $1,000 in assets you have over the relevant threshold, your fortnightly pension reduces by $3. While under the new rules it will only reduce by $1.50.
This means some people who currently don’t receive a pension may be eligible, while those who do may find their fortnightly payments increase.
Remember if you are close to the cut-off point, rolling some money from super into a complying income stream before 20 September could make a big difference. For example, take a homeowner couple both aged 68 who have total assessable assets of $900,000 for Centrelink purposes, mainly in super.
If they keep this money in super or a non-complying income stream, they will not be eligible for the aged pension. But if they roll over $200,000 into a complying income stream before 20 September, their assessable assets will be reduced to $800,000 as only half the $200,000 will be assessable. This means they will be eligible for a small age pension.
It may not seem like a lot up front but when you think of all the benefits a pension card entitles them to, it could really add up.
Of course there are other things to consider when choosing what type of income stream is best for you.
For example, the type of income stream you choose will affect how you are taxed, the access you have to your money and the way the income is assessed under the Centrelink income test.
Remember earning a high income could also prevent you from receiving the age pension.
So it’s important to understand the full picture. The best thing to do is to discuss your personal situation with a qualified financial adviser well before September. They will help you determine how to get the most out of your pension.