- rolling back to 20 September 2007 !

If you are in receipt of an Age Pension entitlement from Centrelink, for every $1,000 owned above the asset test free amount your pension will be reduced by $3 p.f. Until 1st January, 2017 this was a $1.50 p.f. reduction for every $1,000. The thresholds that apply are dependent on whether you are single or a couple and whether you own your own home or not. These thresholds have been increased. For single homeowners, the pension starts reducing when assets reach $250,000. For couples, it is when assets reach $375,000. For non-homeowners, it is $450,000 for a single and $575,000 for a couple.

For some people – because their assets are so high or (alternatively) because they are already on a full pension – this is not a relevant issue. A lucky few will have their Age Pension increased because the higher threshold outweighs the higher reduction. However, for many hundreds of thousands of retirees the outcome is adverse.

If your Age Pension entitlement reduces by $11,000 p.a. (say) from 1st January, 2017 this does not mean you need to cut your sustainable retirement income by $11,000 p.a. Using more of your private resources in the next few years will mean that you will be entitled to more Age Pension in future years as compared to the existing rules. An offset applies. With the power of optimisation maths, in many cases it is possible to structure a retirement plan for those adversely affected that has a higher aggregate present value of Age Pension over life expectancy compared to the old rules.

For those retirees who lose all their Age Pension entitlement from 1st January, 2017 there is a small silver lining. They will be issued with a Commonwealth Seniors Health Card that is exempt from the usual income test requirements indefinitely. The same group could have their ABPs changed to a deemed basis and this could be serious – leading to higher income tests going forward. This is because ABPs that commenced prior to 1st January, 2015 can only remain grandfathered if a retiree continues to be in receipt of an income support payment such as the Age Pension.


The combined effect of these changes

The combined effect of these changes is that while some pensioners will see either no change to or an increase in their Age Pension, many will see their Age Pension reduced, possibly to zero.  The Government estimates that this measure will see 91,000 part-pensioners lose their Age Pension completely while another 235,000 part-pensioners will see their age pension reduced.

The table below illustrates the likely impact of these changes to a pensioner couple who own their own home.

Assessable assets

Current Age Pension

New Age Pension on 1 January 2017

Change in Age Pension

















































A pensioner couple who own their own home with less than $453,500 of assessable assets will see either no change, or an increase, in their Age Pension.  Such pensioners with assets above $453,500 will see their Age Pension fall - in this case by up to as much as $14,122 per annum.

Single pensioners and non-homeowners may also be affected, but at different levels of assets.

If you are concerned about how your Age Pension entitlements may change from 1st January, 2017 and how this will affect your retirement plan, please contact us. It is an area where careful planning can mitigate any adverse aspect of the legislative changes.

Strategies to Consider >