menu

Retirement income (and the new assets test)

Retirement  |  28/03/2017  |   5 min read

Changes to the pension assets test that came into force on January 1 have resulted in some retirees losing some, or all, of their pension entitlements.

But what can you do in response? And what does it mean for your retirement income?

You can learn more by joining Equip at an upcoming retirement expo in your city. Click here for more info and dates.

Tighter assets test

Under the new rules, retirees will lose $3 a fortnight for every $1,000 in assets they hold above a certain threshold, up from $1.50 under the previous rules. Even though the thresholds are higher, allowing more people to qualify for a full pension, fewer middle and higher income earners will qualify for a part pension under the new rules.

On the surface, getting rid of assets may be tempting, especially for anyone near the upper asset threshold. Single homeowners lose the part pension once their assets total $546,250. For home owning couples the upper threshold is $821,500. Note that these ammounts do not include the value of the family home.

The incentive for reducing assets is that retirees stand to gain $3 in pension per fortnight (or $78 a year) for every $1,000 of assets they use up. The argument goes that every $100,000 of assets you enjoy spending today is worth an extra $7,800 a year in pension. That’s equivalent to a return of 7.8 per cent, far better than current savings account rates offered by banks.

Spending money to earn money

There are lots of ways pre-retirees could choose to use up some of their assets to qualify for the age pension. You could take a big trip, pour money into renovations or buy a more expensive house (the family home is exempt from the pension assets test).

Of course, there’s nothing wrong with any of these decisions if you are confident that they won’t leave you short of funds in retirement. But if the sole aim is to maximise pension entitlements, you could well be selling yourself short. For one thing, it ignores the potential opportunity to sell assets in retirement to supplement your income when needed.

Plan for the long haul

The goal of retirement planning is to accumulate enough assets during your working life to provide a comfortable standard of living for what could be 30 years or more of retirement. For all but the very wealthy, this will most likely be achieved by progressively drawing down capital to supplement a superannuation pension and part age pension.

While everyone’s retirement aspirations and financial circumstance are different, speaking to a financial planner can help you make an informed decision, and enjoy a better retirement.

If you’re approaching retirement and starting to think about the issues outlined above please join Equip at one of our upcoming Retirement Ready Expos. You’ll be able to speak with financial planners and Centrelink representatives, hear from industry professionals, and find out more about volunteer programs in your neighbourhood. Attendance is free and everyone is welcome. Click here for more info.


Disclaimer- This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Before making a decision to invest in the Equipsuper Superannuation Fund, you should read the relevant Equip Product Disclosure Statement (PDS). Past performance is not an indication of future performance. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383.

Check your retirement income with the Equip calculator