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Maximising Your Pension

Posted by Naomi Rosenthal on Friday, November 28, 2014 Under: Financial Planning
On 1 January 2015, the way in which superannuation funded “account based pensions” are assessed under the Centrelink and Veterans Affairs (DVA) income test will change. The change will also affect people with “allocated pensions”. In this article, any reference to account based pensions is taken to include allocated pensions.
In many cases, if you are receiving, or plan to receive income support payments from Centrelink/DVA, the new income test assessment may leave you worse off.
But there is some good news if you are receiving Centrelink/DVA income support payments AND have an account based pension in place before 31 December 2014.
GRANDFATHERING
If you are receiving ongoing Centrelink/DVA income support payments AND are receiving payments from an account based pension before 1 January 2015, the present, generally more favourable income test assessment of your allocated pension will remain unaltered. It will be “grandfathered” and will remain in place as long as you continue to receive Centrelink/DVA income support and account based pension payments.
However, if you stop your account based pension for any reason, then a new account based pension will be subject to the new income test treatment.
The key message is that for the current income test treatment of your account based pension to be grandfathered, you must have commenced receiving uninterrupted payments from both Centrelink/DVA and your superannuation provider before 1 January 2015.
THE NEW INCOME TEST TREATMENT
If you commence, or re-commence receiving income support payments from Centrelink/DVA and/or you commence a new account based pension after 31 December 2014, your account based pension will be assessed for income testing under the “deeming” arrangement that applies to “financial investments”.
Under deeming, the current value of all your financial investments are combined and are “deemed” to be earning a rate of income. The deemed rate of income is used to determine the amount of Centrelink/DVA income support you are eligible to receive under the income test. The actual amount of income you receive from your financial investments might be greater or lesser than the deemed rate.
WINNERS AND LOSERS
In some limited circumstances, you may be better off having your existing account based pension assessed under the income test as a financial investment, however, as deeming rates increase, as will inevitably happen over time, the benefit will be eroded. Most people who have an account based pension in place now and are currently receiving Centrelink/DVA, will be financially better off under the grandfathered income test treatment.
If you will not qualify to receive a Centrelink/DVA income support payment until after 31 December 2014, you will be subject to the new income testing regime, even if you already have an account based pension in place before the end of the current year.
WHAT SHOULD I BE DOING NOW?
Time is of the essence.
If you are currently (or will be before the end of December 2014) eligible to receive Centrelink or DVA income support payments and you have, or can commence an account based pension with your superannuation savings, it is advisable to have your present arrangements reviewed.
Even if you will be eligible for grandfathering under the current income test treatment, you should have your account based pension reviewed before 31 December 2014.

Contact us on 02 9455 0655 to arrange an appointment.

In : Financial Planning 


Tags: "age pension" centrelink grandfathering deeming "income test" 

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