I asked about a year ago how Centrelink calculates income from allocated pensions but am still mystified and haven't seen any response to that poser.
I still can't work out how an asset valued at $415,320 which was then producing more than the centrelink assessed income of $4,437.13 pa was calculated, and requests put to my local office for their advice resulted in an explanation that it was an actuarial calculation.
Could someone advise partial age pensioners such as us, in general terms, what the meaning of stopping income from allocated pensions will mean for six months should the recent suggested changes be enacted. That is - by stopping any draw down on the allocated pension for the next six months - does our joint pension increase commensurately?
A. Supplied by Hank Jongen, General Manager, Centrelink
There are a couple of rules that Centrelink uses when determining the net affecting amount of income from an allocated income stream. These are to do with the minimum allowable withdrawal limit and the deductible amount.
These rules are set by the Superannuation Industry (Supervision) Regulations 1994 and are also contained in the Social Security Act. There are also rules around the calculation of income reported by customers, where the customer reduces their draw down amount during the financial year.
The minimum allowable draw down limit for allocated income streams is 'account balance (as at 1 July) x percentage factor'. The percentage factor is an actuarial table that sets the percentage based on a person's age. Note: The current minimum allowable limit for allocated and market linked income streams will shortly be reduced by 50% as announced last week by the Treasurer and Minister Sherry. The limit will revert to the current level as at 1 July 09. Where the customer nominates an amount below the minimum allowable limit, Centrelink will assess the minimum on the customer's record.
The deductible amount is calculated by dividing the purchase price (minus commutations) by the relevant number (another actuarial table based on the persons age and life expectancy). Where a deductible amount is calculated, this amount is deducted from the gross income and net income is assessed only.
If a customer elects to change the amount they are drawing down from their income steam during the financial year then the calculation that is applied (for full year income streams) is: 'Sum of all payments already received and to be received during the financial year from 1 July to 30 June (excluding commutations)'.
Bill who is 66, has an account balance of $100,000. On 1 July 2008 he elected to receive income of $1,000 per month from his income stream. For Centrelink purposes his annual income is $12,000. This is above the (current) minimum limit of $5,000.
On 1 March 2009, in response to the announcement of reduced minimum draw down limits, Bill elects to cease receiving income from his income stream for the rest of the financial year. Bill has already received $8,000 in this financial year. Using the above calculation, the ISP would report $8,000 as Bill's new income amount and this is the amount we would maintain against the customer record as this figure would still be above the revised minimum amount of $2,500.
If a customer elects to change their income they will need to provide a schedule from their income stream provider as it is the provider who applies the calculation noted above.
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