Will the age pension changes impact on you?
PENSIONERS on the Coffs Coast will tomorrow be monitoring what impact the Turnbull Government's changes to the age pension have had to the fortnightly payments made to their bank accounts.
On January 1, the government introduced changes, including assets tests, which they say will make the pension system fairer, better targeted and sustainable for the future.
While it is said around 90% of seniors are not expected to be impacted, some might have their pensions cut or cancelled based on the value of their assets aside from their house.
Based on letters to the editor and calls to The Advocate in recent weeks, there appears to be a level of uncertainty amongst pensioners as to who will be impacted.
Here is what you need to know:
WHO DOES IT AFFECT?
The assets test free area will increase under the new laws from the Turnbull Government, meaning anyone who breaches the threshold will have their payments affected. The thresholds are:
Single homeowner - $250,000
Homeowner couple - $375,000
Single non-homeowner - $450,000
Non-homeowner couple - $575,000
The family home is exempt from the assets test, but investment homes, vehicles, caravans, shares, superannuation and other equity is included.
WHAT WILL IT COST?
The changes that will affect fortnightly payments come through the taper rate, which has been doubled.
That means for every $1000 a pensioner is over the threshold limit, $3 will be deducted from their payments.
If your pension is cancelled as a result of the changes, any concession cards will be also cut.
However, you will be eligible for a non-income tested Low Income Health Care Card.
If you had the aged pension, you are also eligible for the Commonwealth Seniors Health Card.
Since the asset threshold has been lifted from $209,000 to $250,000, some pensioners will see their payments increased.
For more information and to check how much you will lose, head to the Department of Human Services website.
Each year, a growing number of people retire, and many receive the Age Pension for far longer than in the past. By 2054-55, the number of Australians aged over 65 will more than double to 8.9 million, representing about one-fifth of the expected population.
Federal Member for Cowper Luke Hartsuyker said the changes to the assets tests will save taxpayers about $2.4billion over four years.
"We're doing this through two main changes to the assets test: increasing the assets people are able to own before it affects their pension ('the free area'), and increasing the taper rate at which the pension reduces once their savings and assets go over the free area," Mr Hartsuyker said.
"We won't be reducing the maximum rate of the pension, and we'll continue to index pension rates each year, to make sure they keep up with any rise in the cost of living.
"And, of course, the family home will continue to be excluded as an asset when calculating entitlements and all pensioners will continue to have access to a health care card."
The government has developed an informative resource known as the Age Pension Guide 2016/17 Financial Year.
It covers the latest terms and conditions that apply to the age pension, including overseas travel and payment, assets, investments and income testing, changes to pension ages, health care and concession cards as well as carer benefits.
Click here for a copy of the guide or find one at your local council customer service centre.
As the changes come into effect, an expert in life cycle finance says changes to the age pension may lead some pensioners towards risky investments.
"Changes to the Age Pension means tests are likely to encourage wealthier pensioners to spend their savings more quickly than they otherwise would have and take on more financial risk," Professor Susan Thorp from the University of Sydney Business School said.
"Many pensioners, especially the less wealthy and more elderly, hold onto their financial assets into old age.
"However, historically, wealthier pensioners affected by the assets test spend their savings at significantly faster rates than full pensioners.
"This is partly because less wealth means a higher pension for this group. Recent changes encourage better-off retirees to use up their nest eggs faster, rather than preserve and pass their wealth on.
"Risky investments will also look a little more attractive to some pensioners.
Prof. Thorp said the new asset test means that the pension compensates for financial losses at a higher rate than previously. If assets fall by $1,000, the pension rises by $78 compared to $39 previously.