Centrelink’s Age Pension rates are currently as follows:
|Per fortnight||Single||Couple each||Couple combined|
|Maximum basic rate||$826.20||$622.80||$1,245.60|
|Maximum Pension Supplement||$67.30||$50.70||$101.40|
From 20 March 2018, Centrelink’s Age Pension starts reducing when your assessable assets are more than the amounts below:
|Member of a couple, combined||$380,500||$583,500|
And the Pension ceases altogether when your assessable assets are more than the following amounts
|Member of a couple, combined||$837,000||$1,040,000|
What’s the message that the Government’s sending people here?
Well, let’s take an example to illustrate. Say we have one retiree couple, Albert and Betty. They have assessable assets of $380,500, just on the lower asset test threshold. As a result, they receive the full Centrelink age pension and supplements. They receive the following annual income:
- $19,025 – Investment income of 5.0% (assumed) per year on their $380,500 diversified investment portfolio
- $35,573 – Combined Centrelink age pension and supplements
- $54,598 – Total combined annual income
Now let’s take a second retiree couple, Charlie and Deb. They have assessable assets of $837,000, just on the upper asset test threshold. As a result, they receive no Centrelink age pension and supplements. They receive the following annual income:
- $41,850 – Investment income of 5.0% (assumed) per year on their $837,000 diversified investment portfolio
- $0 – Combined Centrelink age pension and supplements
- $41,850 – Total combined annual income
Charlie and Deb are entirely self-funded retirees. They receive no taxpayer-funded benefits from Centrelink, and assume the full investment risk associated with generating $41,850 in annual investment income. However, their combined income is $12,748 per year lower than Albert and Betty who have less than half their assets!
What message is the Government sending to Charlie and Deb? I’d suggest that the message they’re hearing from the Government is ‘Spend your money. Go on that overseas holiday. Buy that new car. We’ll look after you’. And seeing that they are worse off than Albert and Betty even though they have a lot more investments, Charlie and Deb might think that spending their money is the logical and rational thing to do.
But of course, discouraging people from self-reliance is entirely the wrong message. However, as more and more people like Charlie and Deb hear that message, and as the population ages, the current social security structure will come under increasing pressure, and painful consequences will follow. It’s only a matter of time.
Please note that the above is provided as general advice. It has not taken into account your personal or financial circumstances. If you would like more tailored advice, please contact us today. One of our advisers would be delighted to speak with you.