Legislation to extend deeming to account-based pensions passed the Senate on 25 March 2014 and will take effect from 1 January 2015.
The changes to deeming rules for account-based pensions were first introduced by the then Labor Government under its superannuation review in April 2013. While the incoming Coalition Government did not adopt all of the proposed changes, the proposal to extended deeming to new, account-based pensions was. Having passed through the Senate, the legislation will be implemented from next year.
Under current rules, account-based pensions are subject to the same, more generous rules which apply to superannuation pensions. However, there are grandfathering rules which apply to those who receive an income support payment before 1 January 2015 and have in place a complying account-based pension or annuity. Should the recipient switch products after 1 January 2015, or commence a new pension, then this will be subject to deeming at the applicable rates.
Find out more about the Social Services and Other Legislation Amendment Bill 2013.
To find out how such changes may affect your Age Pension, visit HumanServices.gov.au.
While many Australians are fighting the good fight to stop the repeal of the Future of Financial Advice (FoFA) legislation other, equally mean, bills are passing the Senate.
One such measure is a change to the way in which account-based pensions are assessed when applying for the Age Pension. Up until 31 December 2014, account-based pensions will not be subject to deeming. Although income from account-based pensions is counted under the income (and asset) test, a special calculation which recognises the return of capital (i.e. what you have already paid in), is applied which reduces the assessed amount of income. This means that those with a modest amount in super can receive a pension and still be eligible for the Age Pension.
Under the new rules standard deeming rates will apply. This means that Age Pension payments may be reduced considerably. Also a note for those who don’t qualify for an Age Pension but do receive a Low Income Health Care Card, levels of deemed income may mean that you now lose this benefit.
So, in a cruel sleight of hand, it seems that while consumers may have won the battle in delaying the repeal of the FoFA legislation, the war may already be lost.
What about you? Do you think deeming of account-based pensions is a fair move? Is the timing of the passing of such legislation suspect?
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