Note: Changes to the Age Pension assets test are now law and took effect from 1 January 2017. The successful passage through parliament was due to the Greens supporting the changes.
Continue reading to discover what SuperGuide readers think about the Age Pension assets test changes, which took effect from 1 January 2017, and to find out what comment was awarded the inaugural SuperGuide Reader Comment of the Year.
Key changes to Age Pension assets test
Harsher taper rate: The taper rate for the assets test, which determines how much Age Pension you receive, reduces your Age Pension entitlement by $3 a fortnight for every $1000 of assets you own over the FULL Age Pension threshold, which took effect from 1 January 2017. Until 31 December 2016, the taper rate was $1.50 per $1000 of assets over the FULL Age Pension threshold.
In effect, the harsher taper rate means that from 1 January 2017, the PART Age Pension threshold has been cut by around $202,750 for home-owning couples, compared with December 2016 threshold levels, and cut by around $251,200 for single home-owners, which is why 330,000-plus retirees have lost Age Pension entitlements, either partially, or fully.
Increase in FULL Age pension assets test threshold: Since 1 January 2017, the assets-test free threshold for a couple who own their own home increased to $375,000 (since 1 January 2017), from the previous $296,500 (until 31 December 2016). Since 1 January 2017, the assets-test free threshold for a single person who is a home-owner increased to $250,000 (since 1 January 2017), from the previous $209,000 (until 31 December 2016) to $250,000.
The expansion of the lower threshold means 50,000 more Australians are entitled to a FULL Age Pension, who currently receive a PART Age Pension, and the government estimates that increasing the threshold for FULL Age Pension entitlement will benefit 170,000 retired Australians.
Note: The assets-test free threshold is the measure for the FULL Age Pension, that is, when your assets, excluding the family home, are valued lower than the threshold. You are then entitled to the FULL Age Pension, assuming you also meet the Age Pension income.
Before you peruse the 20 comments below, I have awarded one of the comments from a reader, the inaugural SuperGuide 2016 Reader Comment of the Year. Although we appreciate the time taken to post a comment, and we read every comment posted, the comment that won this year’s award has special passion, is empathetic towards the issues facing a large chunk of our population, and most importantly (for award purposes) it is a rollicking good read. We have no prize for the reader (Sue), but we have republished her comment below for other SuperGuide readers to appreciate.
SuperGuide 2016 Reader Comment of the Year
The award goes to Sue, and her comment is set out below
All I want to do is cry for older people affected
I’m 55 and work full time for an Aged Care Service Provider, and all I want to do is cry for older people affected and afflicted with this. This is absolutely criminal! And I’m not talking about myself here, I’m talking about all those who have worked and saved towards a better retirement for themselves. I don’t see why those are being penalised here with cutbacks, it’s like they’ve been duped! I see and assess people every single day, who are living in homes that need repair, but they can’t afford to pay someone to do this, for what they can no longer physically do for themselves. I virtually see people trapped in their own homes, worse if there is no good family relations to support them or assist. It just seems to me, that the Govt wants everyone, except them of course, to be on identical pension incomes, without private health that will no longer be able to be afforded. And what will these new assets laws do? Be some incentive for people to work harder, or will people just think “why bother? The Govt will likely change the goal posts by the time we get there anyway, so why knock ourselves out in the first place, to end up in a coffin earlier?.
I don’t see what stinking right the Govt has to essentially ‘dip into’ the cash flow of what little medium pension income recipients have. As for Ela [another reader comment], well bully for you! All it can take is one simple fall for either yourself or your husband, that lands you or him in a public hospital for months and months on end for YOUR eyes to be opened. How do I know this? I’ve seen it happen, along with the repetitive trips to doctors and physio, and the broken bone takes twice as long to heal, if it ever heals. Might you change sides of the fence if you can suddenly no longer work, or drive yourself to medical appts for a year? The pensioners who’ve worked hard & saved for their Retirement, did so, so they could take it easy for their Rest-of-Life years. So you ‘sanction’ that they should be stripped of this? Wow! Class Act…Not! This Act by this Govt, is nothing but despicable and is a lower stoop than any other Govt has ever made, especially against those who are vulnerable, whatever their Income is. They’re vulnerable via their mere increasing frailty that limits their life activity ability. It’s not hard working pensioners who are greedy Ela [previous reader comment]…it’s the cash predator Govt Australia is afflicted with. Ugh! Absolutely disgusting!
Sample of latest comments (20) from readers
Based on the hundreds of comments SuperGuide has received about the January 2017 Age Pension changes, we consider the Coalition government should be very concerned about its chances of winning the next federal election (due to be held in 2019).
Set out below are 20 examples of readers’ comments taking issue with the changes. For every 100 negative comments about the changes, we probably received 1 or 2 comments supporting the changes – those statistics don’t look good for a political party hoping to win the 2019 federal election.
1. Sheer bloody-minded lunacy (Lorraine)
This change was sheer bloody-minded lunacy, endorsed by fools who got carried away with slick slogans and illogical claims. The pension loss is way more than you can earn on assets, so the obvious response is to reduce savings to increase income. I ran a spreadsheet that suggests that by spending $100,000, you can receive an extra $180,000 (approx.) in pension over 10 years. Why on earth would you hold on to that $100,000? And how does the taxpayer save if people are being paid an $80,000 dividend to spend $100,000? At today’s return rates, you are unlikely to get anywhere near that return from investing, and you have management costs and risks to content with.
2. Why didn’t they tell me before I retired? (Ken)
Right on Cue. I received my letter today saying that I am no longer eligible for the aged pension. Also, that my Pensioner Concession Card will no longer be valid after 31 December 2016. What a great Christmas present for all those that made a significant contribution to their own retirement and made sure they will not be a burden on the tax payer. Just a pity they did not tell me this before I retired, if they did tell me before I retired I may have made the decision to work for an extra year. Thanks to Morrision and co for ripping the carpet out from under old frail legs.
3. Don’t be fooled by propaganda (Bob)
Just got my letter, a reduction from $620.20 (spouse and self) to $156.90 based on assets of $763,734.00. The reduction of $3.00 per thousand is also reflected in the Energy and pension supplements, so when your assets reach $791,330.00 your age pension ceases and you just get the supplement and that cuts out at $816,000.00. (found that out after a 2 hour phone call to Canberra and the fifth public servant I was switched to)
$816,000.00 minus $375,000.00 equals $471,000.00. (homeowning couple).
471 by $3.00 equals $1,323.00. Full old age pension plus supplements equal $1322.40 per fortnight.
Who else recalls Toolbull stating that supplements would not be effected. The cut off point for the actual aged pension is actually much lower than the stated $816,000.00. So starting to plan a round the world trip, may as well spend it before they find another way to rip it off us.
5. Pension slashed by 44%: Coalition will not get my vote (Mike)
Pension Slashed by 44%. After 40 years the Liberal/National Coalition Party will lose our vote at the next election. Likewise, the “Greens” who supported the legislation. Would these people accept a 44% pay cut, I think not. The Government has acted in a very unjust and un Australian manner. They have elected to try and balance the books by picking on those in our community that can least afford it, those that have the least voice and those that do not have a union that can bring pressure to bear. Their actions are despicable to say the least.
Furthermore, we will not be advised formally of our actual loss until December, just in time for Christmas. How low can they go? We have worked hard all our lives, 50 years, earning average pay, paying our taxes, saving our money and paying off our modest assets and making a contribution to the Australian way of life we value so much. We have raised children to adulthood without the help of the government and they now are in the work force and contributing to society. We deserve better. We deserve to be treated in a fair and reasonable manner, not like second class citizens. We have stuck to the rules all our lives, why can’t the Government do the same.
6. Establish a new political party to represent retirees (Vincent)
The LIBs together with the Greens support passed the legislation to cut our pension entitlements. Although Labor opposed the legislation they will not reverse it. Therefore we cannot expect the major political party to look after the interest of the Pensioners. It is high time for the pensioners as well as the would-be pensioners to join together to form a New political party. We can take the injustice happened to us to our sons and daughters and to our grandchildren and get their support to our cause. If we can do this before the next elections I am sure we will get enough votes to influence the major political parties.
7. Spend money or lose Age Pension (Lyn)
We have just paid for our funeral which is allowed . We are going to have a holiday. You are allowed to gift to children $10,000 or $30,000 over 5 years . We don’t want to spend money on our home. What else can we do except lose pension or put it under the mattress.
8. Joe and Jane average hit hard by changes (Colin)
The change in rate of deduction from $1.50 to $3.00 per thousand for assets over $375,000 per couple is going to be horrendous. For every $250 one can earn from bank interest the government is now going to take $780 away. It is bad enough on the present rate …. they currently take $380 away. This from politicians on gold plated pensions that we can only dream about. Pensioners will be much better off putting their money under the mattress !! are Politicians too stupid to realise this. It’s Mr and Mrs Joe Average living in modest houses and have saved for retirement who are going to be the worst off. Why target them ? Why should someone living in a two-million dollar mansion on Sydney’s North Shore be able to qualify for a full pension when someone like me owning a house worth only $215,000 but saved all my life into a pension fund get nothing.
9. One rule for voters, and another rule for politicians, part 1 (Brian)
This change was clearly retrospective and can be compared to the change “forced” on the Howard government in the mid-2000s; that particular change only applied to new politicians after the date of enactment because ” it would not be fair to existing politicians”. Where is the difference? and what is the Labor party having to say about it?
10. One rule for voters, and another rule for politicians, part 2 (Carcap)
These politicians have no principles!! Including the greens who supported the legislation. It is absurd that they think it is okay that a part pensioner who saved all of their working life can now have their measly part pension taken away knowing too well that even if they have $850,000 in income producing assets, at current interest rates they can only generate half of the income of what the full pension is. And then today we see in the papers that these politicians are being paid an allowance of $271 per night even when they are staying in their spouse owned home whilst in Canberra!! SHAME ON THEM!!
11. One rule for voters, and another rule for politicians, part 3 (John and Faye)
Having listened to advice over many years to be frugal, save and get “your savings into super”, we now find that we will be punished to the tune of approx. 20% of our income (super + pension) as of January 2017. We accept that the nation needs to tighten expenditure and must accept our part in this. However, we are yet to see Mr Hockey and all Federal politicians accept a 20% pay cut. We also observe with interest that overseas aid amounts to billions of dollars and Australian pensioners and other citizens needing government support are apparently less important in the political mindset because we are numerically not significant at election time.
Can anyone suggest a way for pensioners to make an electoral difference?
12. Voters have long memories for political lies (James)
Remember how they lied. Abbot promised no change to pensions, him and Hockey couldn’t wait to team up with the greens to screw us over. Don’t accept any promises, we must demand legislated change before the next election, same as it was done to us. They say superannuation is not an estate planning vehicle, but Mr. Harbourside’s mansion is! Messrs Packer, Downer and assorted silvertails inherit billions tax free, we get shafted by 7.8% deeming rate by the filthy lying dogs. We need a universal, untested pension ENTITLEMENT funded by death duties. I paid 60c in the dollar income tax on $40K in the 1980s to fund their pensions, now they say 49c is too high! There wasn’t super and -ve gearing to minimise your tax back then either! The rich are bludging on us, make them pay their share.
13. Hard-working Australians disappointed with the Coalition (Ronald)
We are retired pensioner’s for the last 5 years. I have worked 38 years all my life, never been on the dole, paid my taxes, and still do. Why do I now have to give up what I have earned and contributed towards for a retired life. I feel that our Liberal government has misinformed us as to real situation on the country’d financial problem! – I am truly disappointed in our Liberal government. We now have no alternative, but to dig into our savings. Sad, sad sad.
14. Voter regret (Red Rosie)
I wish all the pensioners who voted Liberal at the last election had really looked into their individual pension situations and fully understood what was already legislated to happen, come 1st January 2017. It is too late now to change what was agreed to by the Liberal National party with the help of the Greens previously. Let’s just hope Mr Morrison doesn’t bring the asset limit down any further in his next round of so called “welfare” cuts.
15. Existing retirees should not be hit with new rules (Concerned pensioner)
And that is the problem! We relied on the rules when we retired. Then the government changes the rules retrospectively!! We should have been grandfathered and left alone.
16. No more private health insurance (Patricia)
This will mean many Age Pensioners will no longer be able to pay for private health insurance…adding to the long queue of people waiting for treatment in public hospitals.
17. Part Age Pensioners are not greedy (Bob)
Once again the government (Liberal or Labor it does not matter) is putting the boots into the little man. Most of your so called”greedy” people [referring to a reader comment] are like myself and wife. We have worked hard all our lives at average paying jobs, saved our money, paid our taxes, brought up 3 children, and received no help form the government of the day. When it comes to time to receive a pension the government of the day change the rules, we only get a part pension and now that will be taken away. Anyone who has ”put in” deserves to be able to” take out”.
When you talk about “entitlements” have a look at what politicians award themselves.
18. Prepare to lose your concession card too (Paul)
You will also lose your rates concession when you lose your pension
19. One rule for voters, and another rule for politicians, part 4 (Honest Senior)
The only thing that has been talked about, is the cuts to the age pension. What sacrifice are the politicians making to help get the budget back into the black? None from what I can see, none of them over the last few years have performed well, and the last I heard was they are getting a 2.5% pay rise and a further $ 12,000 to spend without having to supply any receipts, so if they want, they can just pocket it.
It’s time they led by example and restrained their lavish pay rises and spending, and when they reach pension age they also should come under the same assets test for their pension. What a joke that will never happen. So politicians get your nose out of the troff and stop ripping the public off with your ridiculous entitlements during and after politics and start setting a good example for all.
20. Poor budget decision by government (Ian)
The government has in fact made a poor equity situation far worse for those in the no-mans land between $375,000 up to perhaps $1.5 million. It has effectively destroyed any reason for the greater majority of people to save for retirement. I would not be surprised if this ends up being a net negative to the budget bottom line as retirees change their behaviours. But I am surprised that they have not yet twigged to this yet.
What actions might retirees take who find themselves in this position? Put money into home as you suggest. Or spend on fancy holidays or cars. There’s not much else that I can think of. This situation is actually comparable to the effective high tax rates suffered by those trying to find work and get off Centrelink. “Why bother?” was the conclusion. The economics do not add up.
For information on the latest Age Pension changes…
For information on the latest Age Pension changes, see the following SuperGuide articles:
- Age Pension changes: More Australians entitled to payments from July 2018
- Age Pension: 330,000-plus Australians lose entitlements from January 2017
- Done deal! Lost Age Pension, got new Seniors Health Card
For information on the broader Age Pension rules, see the following SuperGuide articles: