The amount of Age Pension you are entitled to is determined by applying an income test and an assets test. It is the lower result of the two tests which determines the amount, if any, of Age Pension that you will recieve.
If you have an account-based pension it will be included in the income test for the Age Pension, however the method will depend on when the account-based pension commenced.
- Account-based pensions commenced before 1 January 2015 are only partially included in the income test, based on the amount of income drawn from the pension, less a deductible amount.
- Account-based pensions commenced after 1 January 2015 are fully included in the income test, based on deeming rates of the total pension, rather than the income drawn out.
Implications for Clients:
If you have an account-based pension that commenced before 1 January 2015, we recommend the following:
- Do not make any changes to your account-based pension without first seeking financial advice. Any change to your account-based pension will trigger a re-calculation of the income test for the Age Pension under the post-1 January rules.
- Ask your adviser to evaluate whether you will be better or worse off with regard to your eligibility for the Age Pension under the newer rules. If you will be better off being assessed under the newer rules, it may be possible for you to close your existing account-based pension and commence a new one.
Whilst we have already reviewed the situation for our clients for whom this is relevant, we strongly encourage others to seek financial advice. It may not only be the Age Pension that is affected, but also potentially your entitlement to the Commonwealth Seniors Health Card. For further clarification do not hesitate to give us a call.
David is an Authorised Representative of Hillross Financial Services Limited (AR Number 247678).