Changes to the age pension in Australia: What you need to know

Retirees are being urged to seek professional financial advice, as changes to the age pension loom.

From January 1, more than 300,000 Australians are expected to have their pension payments cut, while 100,000 will lose their part pension.

LDB Senior Financial Planner Chris Payne said now, more than ever, was the time for retirees to seek financial advice and assess their overall situation.

“The impact is very significant – it’s the biggest change we’ve seen in age pension in a decade,” he said.

“It’s only the people with very low amounts of assets that actually benefit, but the majority of people will be losing a lot of their pension, and it’s not a few dollars.

“Some of these people are having their pensions cut by 50-60%, sometimes more.”

From January 1, the assets test free area will increase to $250,000 for single homeowners (up from $209,000); $375,000 for a homeowner couple (up from $296,500); $450,000 for a single non-homeowner (up from $360,500); and $575,000 for a non-homeowner couple (up from $448,000).

However, the taper rate for pensioners will also increase, causing some pension holders to see a reduction in payments, or have their pensions cancelled altogether.

Currently, for every $1000 of assets a pensioner owns above the assets test free area, their pension is reduced by $1.50 per fortnight, but from January 1, this will double to $3.

Part pensions will be cancelled when assets are more than $542,500 for single homeowners (down from $793,750); $816,000 for couple combined homeowners (down from $1,178,500), $742,500 for a single non-home owner (down from $945,250); and $1,016,000 for a non-homeowner couple (down from $1,330,000).

Mr Payne said LDB could help guide retirees through the changes.

“If people still need a certain amount of income to live, they’re going to have to draw down on their assets more, so they need advice on how to make those assets last,” he said.

“Can they do much about the reduction in pension? Not really, but where we can add value is by helping their other assets to do better or last longer to bridge that gap.

“An advisor can help them to identify investments that will produce a better return than what they can get if they just go to their local bank.”

For further information about changes to the age pension, visit this Australian Government website.

Need to seek financial advice?

For expert advice on financial matters relating to the age pension changes, please get in touch with LDB by phoning (03) 9875 2900 or filling in the contact form below.