There were a number of proposed changes to super announced in the 2016 Federal Budget including reductions to the annual caps on concessional and non-concessional contributions for people still saving for their retirement.
The one proposal which may have an impact on a small number of retirees is the $1.6 million cap on funds invested in an Account-Based Pension Plan. If you are one of these people, we recommend you make an appointment with your financial planner to discuss your options.
However, it’s important to remember that as of August 2016 these proposals have not been passed by parliament and are yet to become law.
However, there are some changes announced in the previous Federal Budget which will have an impact on many retirees’ Age Pension entitlements. These changes have been passed by parliament and will come into effect on 1 January 2017.
First are the changes to the upper threshold of the Assets Test and for some members this means they will receive a reduced Age Pension.
If you are single the reduction to the upper thresholds is as follows:
And these are the reductions to the upper thresholds of the Assets Test for couples:
However, there is good news for people with assets valued at the other end of the spectrum. The lower assets threshold will increase and this means that more people will be eligible for the Age Pension.
If you are single the lower thresholds increase as follows:
And below are the changes to the lower Assets Test thresholds for couples:
It’s important to note that the Assets Test does not include the family home as long as you are still living in it, but does include the balance of your Account-Based Pension Plan.
And finally there is an increase of the taper rate for the Assets Test. Currently your fortnightly Age Pension payment is reduced by $1.50 for each $1,000 of assets you own, but this rate will increase to $3.00 from 1 January 2017.
This means that many people who are currently entitled to the Age Pension may receive a lower payment.
If you think these changes to the Assets Test and the taper rate may have an impact on your Age Pension entitlement, we recommend that you make an appointment to discuss these matters with your financial planner.
Your financial planner will help you assess your situation and may undertake some financial modelling, before looking at alternative strategies or different product solutions.
They can also explain the benefits of our Guaranteed Income products and help you determine whether or not these options may be suitable for your needs.
Our financial planners can also help you understand the benefits of ‘income layering’ which is simply matching your income from different sources to meet your ongoing expenditure.
Below is an illustration of how income layering can ensure you always have the income to meet your essential expenditure while relying on other sources of income to pay for desirables such as travel and entertainment.
So if you think you may need some advice on income layering or your investment strategy, don’t hesitate to contact your Local Government Super financial planner.
If you haven’t previously met with one of our planners, just call us on 1300 LGSUPER (1300 547 873) to arrange an appointment or request an appointment online.