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From the 1st of January, your pension income could be drastically reduced. How can you avoid this, or find an alternative source of income?
If your financial goals revolve around your superannuation, some drastic changes are required.
From the 1st of January, the assets test threshold for pension reductions will increase, but the rate at which your income goes down will increase to $3 per $1,000 above this threshold.
According to the Commonwealth Bank, that effectively doubles how quickly your pension reduces as your assets breach the thresholds. For many Australians, that is going to mean significant loss of retirement income, to the point where the pension could disappear entirely. So how can you protect this financial lifeline?
Who will lose their pension in 2017?
The increase to the asset test threshold means that anyone with property apart from your principal place of residence (PPR), vehicles, cash and investments, superannuation funds, business and personal assets that total over a specific amount will start losing their pension. The new limits are as follows:
- $250,000 for a single person who owns a home
- $375,000 for a couple that own a home
- $450,000 for a single person who does not own a home
- $575,000 for a couple that does not own a home
According to Super Guide, some 300,000 Australians will be impacted by the Department of Human Services changes to the pension. On top of this, about 100,000 people will lose their retirement income in its entirety. Anyone who thinks they will be impacted should take a look at their financial planning.
Strategies to protect your pension
To receive your full pension, your assets must be below the thresholds stated above. To reduce your assets, the following strategies could apply:
- Gifting them to family (within legal threshold of $10,000 per year),
- Conducting renovations or additions on your PPR, which is exempt from the changes,
- Purchasing a new PPR, or
- Contributing money into a spouse's superannuation fund.
Everyone is going to require a different solution to the pension and assets test adjustments."
It is important to remember that these are not guaranteed to work, and require professional financial advice before you decide to move ahead with them. If you are unable to bring your assets down below the thresholds, then you may need to look at alternative forms of retirement income, like investment property.
Just as everyone's financial situation is different, everyone is going to require a different solution to the pension and assets test adjustments. At Yellow Brick Road, we offer tailored financial advice on investments and superannuation that could help you weather this storm. Contact your nearest local representative to find out what you can do.