As reported recently, from January 2017, around 300,000 Australian pensioners will need an alternative source of retirement income as they will be affected by the new ruling in age pension asset test. In less than six months, many will receive a lower pension and some will lose their pension completely. What’s even more concerning? Most of people are unaware of this radical looming change.
Australians, who are aged 65 and above, are entitled to receive part or full pension. Their age pension entitlements are based on their income and asset test. The new rules on age pension asset test were recently legislated and would take effect in January 2017.
People who are nearing retirement or are currently receiving pension entitlements should check their assets ahead of time before the changes take effect. Almost 100,000 of Australian pensioners will lose their entitlements if they don’t act now.
The new asset test ruling allows full pensioner homeowners to own assets up to $250,000 if they are single and up to $375,000 for couples. On the other hand, if you a full pensioner and don’t own a home, you can own assets up to $450,000 if you are single and up to $575,000 for couples if you don’t want your entitlements to be affected.
For part pensioner homeowners, they can own assets up to $547,000 if they are single and up to $823,000 for couples. Part pensioners who don’t own a house can own assets up to $747,000 if they are single and up to $1 million for couples to still be eligible for age pension.
Because of the new asset test ruling, 50,000 of Australians are expected to be better off and receive a full pension. However, around 91,000 of part pensioners will lose their entitlements completely and more than 235,000 will have their entitlements reduced because of the new age pension asset test.
Those who will lose their entitlements can either apply for a Commonwealth senior’s health card or a low-income health card. But we all know that these cards won’t be enough. These cards can only help with medical and pharmaceutical expenses.
If you think you’re one of those who will be affected, consult your financial adviser and plan strategies ahead of time. If you’ve been longing to make renovations, upgrade your vehicle, or take a vacation, it’s feasible you may have more incentive to do that now. Your family home is exempt from the Centrelink means testing so effectively, any money put into it will not be assessed.
However, if you’re going to lose your pension completely, there are other ways to supplement lost income. One is accessing the equity in your home through a Reverse Mortgage. The funds can be accessed as a lump sum, a regular income stream, a line of credit, or a combination of these options. A Reverse Mortgage can effectively fund your needs so you can live a comfortable lifestyle in your retirement years, with or without pension.