January pension changes hit pensioners with unwelcome Christmas gift
On January 1, 330,000 part aged pensioners will see their fortnightly payments drastically reduced – and many don’t even know it is coming.
From next year, pensioners with assets over $166,000 (excluding the family home) will have their penalty doubled from $1.50 to $3 for every $1,000 they have saved over the $166,000 – meaning their pension will be cut by this amount.
The full pension for a couple is $34,382 a year – so the more savings you have, the less you will receive of this amount.
Before the changes, pensioners would have received some payment on assets valued up to $1.17 million. After the change, this amount will be capped at $816,000.
No incentive to save
The idea is that financial advisers will now tell their clients that if they reduce their savings considerably, by $441,000, they can ensure they get this $34,382 a year pension – which is tax-free.
This would give them a 7.8% return on the $441,000 – great value.
But they won’t be able to downsize from the family home because this will free up their assets again. If anything, pensioners will be better off spending their $441,000 to increase the value of their home by renovating or adding improvements.
It’s a move that will do little to ease the housing shortage around Australia.
As veteran commentator Robert Gottliebsen notes in The Australian, the Prime Minister Malcolm Turnbull and Treasurer Scott Morrison should head off on holidays early and not come back until the end of January as they ride out the storm.
One thing is certain – it will be a hard sell for the Federal Government.