In nine weeks’ time 330,000 part aged pensioners are going to have their fortnightly payments savagely cut and most have not got a clue it is coming.
From January 1, 2017 pensioners with assets (excluding the family home) over $166,000 will have the penalty doubled from $1.50 to $3.00 for every $1000 they have saved over the $166,000 – meaning their pension will be penalised by this amount.
The full pension for a couple is $34,382 a year. This is the amount that will be chipped away faster the more savings you have.
Before the change you received some pension on assets up to $1.17 million. After the change it caps out at $816,000.
Hanging onto the family home
The expectation is that financial advisors will now suggest to clients that if they reduce their savings dramatically, by $441,000, they can lock in this $34,382 a year pension – which is tax-free.
Think about it. Technically this $34,382 is a 7.8% return on the $441,000 – which you also get to spend on yourself. Brilliant!
One thing you can’t do is downsize the family home because it will release cash again. Better in fact to spend $441,000 improving the family home and increasing its value.
So much for releasing housing stock for young families.
As veteran commentator Robert Gottliebsen points out in The Australian, the Prime Minister Malcolm Turnbull and Treasurer Scott Morrison should take an early Christmas holiday and not come back until late January to avoid the storm!
This initiative was a 2015 Abbott government idea. Now the Turnbull government will have to sell it. Good luck.
