When you woke up on the 01/01/2015 the Age Pension rules had changed and it will affect everyone moving forward.
From 1 January 2015, new Account Based Pensions (ABPs) will be assessed the same way as financial investments, such as cash, shares and managed funds.
This means that these ABPs will be subject to deeming rules for Income Test purposes. This is for determining an individual’s entitlement to Centrelink and DVA benefits.
The deeming will apply to Account Based Pensions but not to Defined Benefit Pensions, Lifetime and Life Expectancy Annuities and Fixed Term Annuities if the term is longer than five years.
Grandfathering provisions will apply to ABPs commenced before 1 January 2015 where:
1. The person was receiving an eligible Income Support Payment immediately before January 2015; and
2. Since 1 January 2015, the person has been continuously receiving an eligible Income Support Payment.
These ABPs will retain the current Income Test assessment for social security purposes where the pension payments are assessed concessionally, allowing for the return of the capital.
Grandfathering will also apply to ABPs that meet these conditions and revert to a reversionary beneficiary following the death of the pensioner if the reversionary beneficiary is in receipt of an eligible Income Support Payment at the time of reversion and if they continue to receive an eligible Income Support Payment.
The following non-means tested payments are not an eligible Income Support Payment and will not allow the person to take advantage of grandfathering provisions:
1. DVA War Widows/Widowers Pension;
2. DVA Disability Pension (Total Permanent or Total Temporary Incapacity Pension);
3. Carer Allowance.
In addition, individuals holding a Low Income Health Care Card but not in receipt of an eligible Income Support Payment will not be able to take advantage of grandfathering provisions.
Not all pensioners will be affected by these changes, as the amount of most pensions and allowances the person is entitled to depend on the level of their assets and income.
Both tests are applied and the test that gives the lower entitlement is applied. If the pensioner has financial investments only, the interaction between the income and assets tests means that as the level of their assets rises, the pension entitlement will start reducing by the income test.
Once the level of financial investments reaches a certain threshold, the assets test becomes the determining test.
This means that pensioners with relatively high ABP balances will not be affected by these changes, as their pension entitlement will be determined by the Assets Test.