Changes to defined benefit super to hit pensioners
Pensioners are being urged to remember a change to Centrelink’s income assessment in January next year could have a significant effect on the level of age pension a taxpayer receives.
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."