The government have just confirmed the details surrounding what most retirees feared, the application of deeming rates to retirement income streams including allocated pensions.
Currently, retirement income stream balances are not deemed, and a deductible amount is applied to the pension amounts drawn, often resulting in very little of the pension received being assessed via the Income Test. For many people, this can directly affect whether they receive some or no entitlements. For others currently receiving Centrelink benefits and drawing a retirement income stream, this treatment will continue (called Grandfathering) after the 1 January 2015. This is however a big sting to the tail.
The biggest hit will be to those people currently in receipt of a low income health care card but not receiving any payment support from Centrelink. As of the first of January 2015, regardless of the income your drawing, your retirement income stream balance will be deemed and you could lose your Low Income health Care card. The cost to you over a 12 month period could be thousands because you won’t be able to get discounts on utility bills, prescriptions and car registration, for example.
Of course if you alter your retirement income stream on or after the 1 of January 2015, then this could have a significant impact on any pension payments from Centrelink, and as such we suggest that you contact us to help you maintain your existing entitlements.
We are also seeking clarification on the situation when you take a holiday overseas. Entitlement to Centrelink benefits can stop when you holiday overseas, and we are looking to confirm the potential impact on our clients.
Others that will be affected are the partners of people currently drawing an allocated pension and receiving no income support from Centrelink, where the allocated pension balance will be deemed after the 1 January 2015.
So in summary, there isn’t a lot of good news from the Government, however what is good is, Mark Felton from our practice is here to help. With over 13 years’ experience as a financial planner, it is important to contact him now.