Australian Age Pension recipients are being warned that a scheduled payment increase from 20 September could be partly swallowed by higher Centrelink deeming rates, with some pensioners facing a reduction or loss of their entitlement altogether.
Services Australia has begun notifying affected recipients ahead of the changes, which will increase the assumed return on financial assets such as savings, shares, managed funds and superannuation held by people over pension age.
The maximum Age Pension will rise by $36.80 a fortnight for singles, to $1,237.70, while the combined rate for couples will increase by $55.60, to $1,866. But the higher headline rates will not benefit everyone equally.
Why the Age Pension increase may be reduced
From 20 September, the lower deeming rate will rise from 1.25 per cent to 1.75 per cent. The rate applied to financial assets above the relevant threshold will increase from 3.25 per cent to 3.75 per cent.
The thresholds will remain at $66,800 for a single pensioner and $110,600 for a couple. Centrelink uses these assumed returns as income when applying the Age Pension income test, regardless of the actual performance of an investment.
That means a pensioner whose deemed income rises may receive less of the increase announced for September. Those already close to an income-test cut-off could see their payment reduced further, while people above the limit could lose their pension payment under the income test.
The changes come after the Government Actuary recommended higher deeming rates, with the Federal Government saying the new figures better reflect returns that pensioners can reasonably obtain from their investments.
Financial assets may also affect payments under the separate assets test. Services Australia assesses a person under both tests and applies whichever produces the lower rate, meaning a pension can be reduced or cancelled if the value of assessable assets exceeds the relevant limits.
What pensioners can do to check their position
Recipients should check their Centrelink records before the new rates take effect, particularly the balances recorded for bank accounts, shares, managed investments and superannuation. Errors or outdated figures can result in an incorrect assessment.
Changes to income and assets can be reported through a Centrelink online account linked to myGov. Services Australia says pensioners must also notify it when their financial investments or other circumstances change.
There is no general exemption from deeming, and shifting money between ordinary financial investments will not normally remove it from the assessment. Pensioners considering major changes to their savings or investment arrangements should seek regulated financial advice before acting.
Those who continue working may be able to limit the effect of employment income through the Work Bonus. Eligible pensioners accrue a $300 fortnightly allowance, with unused amounts able to build to a maximum balance of $11,800. The concession applies to eligible employment income, not investment or superannuation income.
The September changes will be applied automatically. Pensioners who receive a letter showing a lower rate should compare the figures with their current income and asset details and contact Services Australia if the assessment does not reflect their circumstances.
