How will changes to pensions announced in the Federal Budget 2014 affect you?
Fulfilling its commitment to not make any changes to pensions in its first term, most of the changes announced in the Federal Budget 2014 will not take effect until September 2017. The measures to make pensions more sustainable include increasing eligibility age, indexation calculations and removal of certain supplements.
Increase in the Age Pension eligibility age
As previously announced, the age at which Australians will be able to claim the Age Pension will rise to 70 by 2035. This is an extension of the previous Government’s raising of the eligibility age to 67. Eligibility age will now be as detailed in the table below:
|People born between||Eligible for the Age Pension at age|
|1 July 1952 and 31 December 1953||65.5|
|1 January 1954 and 30 June 1955||66|
|1 July 1955 and 31 December 1956||66.5|
|1 January 1957 and 30 June 1958||67|
|1 July 1958 and 31 December 1959||67.5|
|1 January 1960 and 30 June 1961||68|
|1 July 1961 and 31 December 1962||68.5|
|1 January 1963 and 30 June 1964||69|
|1 July 1964 and 31 December 1965||69.5|
|1 January 1966 and later||70|
Asset and income test thresholds
As part of the Federal Budget 2014, the indexation of asset and income thresholds will be fixed from 1 July 2017 for a period of three years. This means that increases in income and assets of an individual or couple over these three years could result in a reduction of the Age Pension, Carer Payment, Service Pension or Disability Support Pension.
The family home, if a principle place of residence, will not be included in the pension asset test.
From 1 July 2017, increases to pensions, including the Age Pension and Disability Support Pension, will only be linked to inflation and will not be benchmarked to Male Total Average Weekly Earnings (MTAWE). Over the previous four years to March 2014, benchmarking to MTAWE has resulted in pension payments over that period totalling $2000 more than they would have been if linked only to inflation.
Changes to deeming thresholds
For the purposes of the pension income test, the Government will change how it deems the return from a person’s financial assets. From September 2017, the deeming thresholds will be reset from $46,600 to $30,000 for singles and from $77,400 to $50,000 for couples. This essentially means that income above such thresholds will attract the higher deeming rate, which is currently 3.5 per cent.
Clean Energy Supplement
While it remains the Government’s intention to abolish the carbon tax, it has committed to maintaining the Clean Energy Supplement, which will now be called the Energy Supplement, at current levels.
Commonwealth Seniors Health Cards
Following through on its election promise to index the eligibility thresholds for Commonwealth Seniors Health Cards (CSHC), this will be implemented as part of the Federal Budget 2014 and will take place from September 2014.
While this may assist more self-funded retirees to become eligible for a CSHC, the payment of the annual Seniors Supplement will cease after this year’s payment in June. The Seniors Supplement is currently $876.20 for singles and $1320.80 for couples combined, per annum.
Editor's note: The Seniors Supplement is paid only to Commonwealth Seniors Health Card holders and is not the same as the Pension Supplement which is paid to those who are eligible for a pension.
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