Changes to the age pension rules – will you be affected?

Increase in the assets test threshold

The assets test threshold is the amount of assets pensioners can hold before their pension starts to reduce under the Centrelink assets test. The table below shows the new thresholds from 1 January 2017.

Assets test thresholds from 1 January 2017

Increase in the ‘taper rate’

The taper rate is the rate at which the Age Pension reduces as assets increase. From 2017 the taper rate will increase from $1.50 a fortnight to $3 a fortnight. This means the maximum age pension a pensioner can receive will be reduced by $3 per fortnight for every $1,000 of assets they hold above the assets test threshold.

How the changes could affect your age pension

The higher assets test thresholds will generally mean:

· Age pension recipients with an asset value ‘around’ the thresholds are likely to see an increase in their age pension entitlement, and

· Age pension recipients with assets above the threshold are likely to see a reduction in their Age pension – in some cases to zero – as a result of the increased taper rate.

Example

Retired couple Betty and John are both 68 years old and own their home. They have $823,000 in total assets and currently receive a part Age Pension of $500 per fortnight. If their assets remain unchanged on 1 January 2017, their Age Pension is estimated to reduce to zero (see Chart 1 and Chart 2).

Chart 1– The effect of a couple homeowner’s age pension as at 1 January 2017

Chart 2 – Projection of future entitlements

Assumptions: 68 year old couple, homeowners, personal assets at $15,000, financial assets that are deemed at $808,000 and CPI at 3 per cent (any earnings are spent each year).

Source: Challenger