Business News

Advisers working through Centrelink changes

The incoming changes to the asset test for the age pension and its effect on their SMSF clients have been top of mind for advisers, with demand and queries for strategies to reduce their impact high, according to Colonial First State (CFS).

“The immediate issue we’re getting a lot of feedback around are these Centrelink changes, which are coming in on 1 January,” CFS product and investments general manager Peter Chun told selfmanagedsuper.

“And they really do hit a large number of SMSF clients because the average SMSF balance is around $800,000 and the median is $600,000.

“What these Centrelink changes are about is that there’s an asset test change, which for a couple homeowner, between $500,000 to $1.2 million of personal assets, they will see a reduction in their age pension entitlements.

“So if you think about that range of customers, that’ll touch a fairly large SMSF segment.”

Chun said many SMSF advisers were working on strategies to try to minimise the reduction in age pension for their clients.

“Things like maximising spouse contributions, things like purchasing a longer-term annuity, so greater than a six-year term, which helps minimise that asset test impact,” he noted.

“So there’s a lot of activity in that space because that’s only a couple of months away.

“A lot of advisers are really getting their act together and talking to their clients to minimise the age pension reduction.”

In response, CFS has issued a number of case studies through its technical services team, FirstTech.

“They’ve released their 100th edition and have provided five to six key strategies on this alone that we’re helping advisers with for these Centrelink changes,” Chun said.

The age pension rule changes were handed down in the 2015 federal budget and dictate new thresholds of assets such as superannuation, bank accounts, cars and investment properties retirees can own before they lose a share of their age pension entitlement.

Under the new rules, individuals stand to lose $3 a fortnight of the age pension for every $1000 of assessable assets they hold over the test threshold, compared to the $1.50 per fortnight reduction they are currently experiencing.

However, while the loss of age pension entitlement has been doubled, the asset test threshold has been increased.

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