The change will see the level of defined benefit superannuation income that can be excluded from the age pension income test capped at 10 per cent.
Findex Group senior financial adviser Andrew Rafty said the change will commence on 1 January 2016 and affect all funded defined benefit pensions.
“The change is simple but can have a large effect on the level of age pension received,” said Mr Rafty.
“The proposed change has the potential to affect many current Age pensioners who have a non-assessed portion of their defined benefit pension greater than 10 per cent.”
Those who are already ‘income test critical’ will definitely be affected since the change increases the level of income assessed.
“There are also those pensioners whose level of Age pension is determined by the level of their assets i.e. asset test critical,” he said.
“These pensioners can also be affected if the extra income being assessed causes them to become income test critical.”
For couples and singles, every extra dollar assessed has the potential to decrease their age pension by 50 cents, he said.
These usually indexed pensions, Mr Rafty said, are a majority of the state-based public sector and private pensions, including pension schemes such as NSW State Super, NSW Police Super, Commonwealth Bank Officers’ Super, Uniting Church Super and HP Super.
Unfunded pension schemes would not, however, be affected by the changes to defined benefit pensions.
“Unfunded pensions are paid from our taxes via consolidated revenue and are currently 100 per cent assessed by Centrelink; examples are the Commonwealth Super Scheme (CSS) and Defence Forces Retirement and Death Benefit DFRDB,” he said.
“So the proposed changes will affect those pensioners with a high pre-83 service and/or high non-concessional contributions.”
My wife & I have CSS defined benefit pensions. Our combined income is $68,000 pa. Are we likely to be affected when the new rules come in on Jan 2017?
Thank you.
Stuart A, we are also low income aged pensioners. When I joined the state super scheme, the system on which it works is all that there was available to me. I contributed the maximum allowable 9% for decades. Now the “frugality” is coming back to bite me. Between my wife and myself our old age pension is being reduced by $100 each week. Mr Morrison, we are not double dipping wealthy fat cats, thay are all in parliament.
The changes will hit “anyone” with a Defined Benefit Scheme for Centrelink purposes. We are low income pensioners, yet my wife who is an ex employee of a Private (not Public Service) company will lose $40 per f/n as a result of these changes. Its disgusting. WE can however afford to provide breastfeeding MPs with additional business class flights for nannies and family
Sorry to burst your bubble but…….