Changes to Age Pension Assets Test from 1 January 2017
While the asset test is less onerous at relatively low asset levels after 1 January 2017, it leads to a substantial reduction in Age Pension when higher levels of superannuation and other assets are held.
The new assets test free areas are:
- $250,000 for a single homeowner
- $375,000 for a homeowner couple
- $450,000 for a single non-homeowner
- $575,000 for a non-homeowner couple
The family home is still exempt from the assets test.
Prior to 1 January 2017, for every $1,000 of assets you own over the assets test free area, the pension is reduced by $1.50 per fortnight. This is called the taper rate.
From 1 January 2017, the pension will reduce by $3 per fortnight for every $1,000 of assets over the asset free area.
As a result the following was expected to occur:
- Approximately 416,000 age pensioners affected
- A small increase in the percentage of retirees on the full Age Pension in 2023 (compared to what would have been the case if the asset test had not been altered)
- 170,000 are better off, with 50,000 previously receiving a part Age Pension expected to receive a full Age Pension after the thresholds change. A further 120,000 on a part Age Pension were expected to have their payment to increase by $30 per fortnight
- An increase in the proportion of retirees who are self-funded, albeit at a lower level of income than would have been the case if no change had happened in regard to the asset test
- The changes also have resulted in around 91,000 losing their Age Pension entitlement and about 235,000 seeing their part Age Pensions reduce
- Those who lose their Age Pension have received a Commonwealth Seniors Health Card, which will be exempt indefinitely from the associated income test
- Losing a Pensioner Concession Card will mean that many of those losing their Age Pension will also no longer qualify for various concessions and reductions in fees and charges offered by a range of State and Territory government departments and agencies. However, some State, Territory and private sector concessions are available to holders of a Commonwealth Seniors Health Card.
The Department of Human Services website has further information on the Asset test for Age Pension. Click here to find out more
A person affected by the changes should be very careful before spending more and running down assets in order to get the Age Pension or switching to a more risky investment in order to obtain greater investment income to make up for a lower rate of Age Pension.
Running down assets is a very short-term strategy that can compromise long term living standards. Retirees should also be careful they are comfortable with the risk profile of the investments they hold and for the investment option they have chosen with their superannuation fund. While a change to the Age Pension rules may be a reason to review your financial situation, it does not mean that it is sensible to take on undue risk with investments.