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Age pension changes 1 January 2017

This is general advice only This presentation was prepared by Bridges Financial Services Pty Limited (‘Bridges’). ABN 60 003 474 977 ASX Participant. AFSL Number 240837. This is general advice only and has been prepared without taking into account your particular objectives, financial circumstances and needs. Before making any decision based on this presentation, you should assess your own circumstances or consult a financial planner. The examples used are for illustrative purposes only. A Product Disclosure Statement(s) (PDS) for the product(s) outlined in this presentation is available from your financial planner which you should consider before deciding whether to acquire this product(s). You may also contact our Client Advisory Services on 1800 221 151 (free call) between Monday to Friday 9.00am to 6.00pm (Sydney time). To the extent permitted by law, Bridges, its officers, employees, agents, consultants, advisers and representatives are not liable for any loss or damage as a result of any reliance placed on the contents of this presentation. In referring customers to Bridges, <insert name of referral partner, ABN and AFSL> does not accept liability or responsibility for any act or omission or advice provided by Bridges or its Authorised Representatives. Bridges is part of the IOOF group. Before we start, I need to point out that the information in this presentation is general advice only and not personal advice. This means that the advice doesn’t take into account your personal objectives, financial circumstances and needs. You should carefully assess your own circumstances or consult a financial planner before making any decision based on this presentation. Note to planner Using the above text when this slide is displayed (not just leaving the slide on-screen for a brief period while you talk about something else) may assist in confidence building at the beginning of your presentation, adding to your credibility and professionalism. You may choose to delete paragraphs 3 and/or 4 if examples are not used nor products discussed in your presentation.

What has changed? The asset test The income test

Centrelink means testing Means testing includes: An asset test An income test Both tests are applied to benefit recipients The test with the worst outcome is applied

Centrelink means testing There have been changes to: The asset test The income test Both tighten access to Centrelink benefits

Asset test

Asset test increase As at 1 January 2017 you may qualify for the full age pension with more assets $250,000 for a single homeowner $375,000 for a homeowner couple $450,000 for a single non-homeowner $575,000 for a non-homeowner couple Centrelink means test changes

Asset test increase The taper rate also increased: To $3 per $1,000 from $1.50 per $1,000 This taper rate is applied when assets exceed the lower threshold

Asset test rebalance What does this mean? A lower pension for some people Pension cut-off points will be lower Lose pensioner concession card but get CSHC Your situation Previous cut off point Current cut off point Difference Single, homeowner $793,750 $542,500 - $251,250 Single, non-homeowner $945,250 $742,500 - $202,750 Couple, homeowner $1,178,500 $816,000 - $362,500 Couple, non-homeowner $1,330,000 $1,016,000 - $314,000

Asset test rebalance What does this mean? Some pensioners areaffected If assessable assets are at the new cut-off point Your situation Current pension at cut-off points Single, homeowner $9,798 Single, non-homeowner $7,907 Couple, homeowner $14,102 Couple, non-homeowner $12,230

Asset test – the tipping points Homeowner couples with combined savings of between $296,501 and $453,475 may receive a larger age pension As an example, a homeowner couple with $375,000 in assets will have their age pension increased by $116 per fortnight Homeowner couples with combined savings above $453,500 are negatively affected

Income test

Income test changes Starting 1 January 2015, there were changes to the income test Defined benefit pensions, fixed term and lifetime annuities exempt New account-based pensions are ‘deemed’ Assumed to earn a certain amount of interest Assumed earnings included in the income test assessable amount Previously a portion of each self funded pension was exempt Deductible Amount = Purchase price ÷ Relevant number Grandfathering provisions apply Grandfathering applies if you had a pension and received Centrelink benefits (as at 31 December 2014) and you do not discontinue that pension

Income test changes Case study before 1 Jan 2015 Bob (single age 65) Invested $200,000 in his own pension Average life expectancy 65 male = 22.63 years Amount disregarded by Centrelink = $200,000 ÷ 22.63 = $8,838 per year Minimum pension payment ($200,000 x 5%) = $10,000 Amount disregarded by Centrelink = $8,838 Amount counted by Centrelink = $1,162 The income test counts only $1,162 Note: the asset test could have a worse outcome

Income test changes Case study after 1 Jan 2015 Bob (single age 65) Invested $200,000 in his own pension Average life expectancy 65 male = 22.63 years Amount deemed as income by Centrelink first $49,200 at 1.75% = $861 balance ($150,800) at 3.25% = $4,901 The income test counts $5,762

Income test changes What does this mean? The deeming rates are monitored on an ongoing basis Any changes usually coincide with the indexation of pensions Good if your investments earn more Bad if your investments earn less Income test for pension entitlements now more severe The income test is more severe! $5,762 versus $1,162

Income test change for defined benefit pensions Income test of defined benefit pensions before 1 Jan 2016: Amount counted as income for Centrelink = Pension payment – tax free amount of pension Income test of defined benefit pensions after 1 Jan 2016: Same as above, except where the tax free amount is greater than 10 per cent of pension payment, only up to 10 per cent can be used to reduce assessable income Military defined benefit pensions are excluded from the change

Income test change for defined benefit pensions – example Bob (single age 65) Received defined benefit pension of $25,000 per year Tax free amount of pension = $3,000 Amount counted as income for Centrelink = $25,000 - $2,500 = $22,500

Summary Changes to asset and income tests Changes to taper rate Changes to eligibility for CSHC – if PCC is lost There are winners and losers – generally those with higher levels of assets lose but some people with lower asset levels also lose

Concession cards

Concession Cards Pensioner Concession Card Commonwealth Seniors Health Card State based Eligible if receiving a Centrelink or DVA pension Federal Eligible if pension age and not getting pensioner concession card

Commonwealth Seniors Health Card Meet an income test (no assets test). Automatically lost if Age Pension lost due to 1 Jan 2017 assets test changes Adjusted taxable income, indexed on 20 September each year, and A deemed amount from account-based income streams You should have an annual income of less than: $52,7961 for singles $84,4721 for couples combined, or $105,5921 for couples combined, couples separated by illness or respite care, or where one partner is in prison 1 The income limit is increased by $639.60 for every child you care for 1 20 September 2015 limits – subject to change

Commonwealth Seniors Health Card Discounts on PBS prescription medicines May also get discounts or a concession on: bulk billed doctor appointments, at the discretion of the doctor cheaper out of hospital medical expenses Concessional rail travel on Great Southern Rail services In some instances, state-based concessions (discretionary) for household rates, transport, education and recreation

Low Income Health Care Card Meet an income test (no assets test). Automatically lose if Age Pension lost due to 1 Jan 2017 assets test changes For a 8 week period ending day claim is submitted, Income must be less than: $4,2961 for singles ($537 per week) $7,4241 for couples combined ($928 per week). 1 The income limit is increased by $639.60 for every child you care for. Rates current as at 20 September 2016 Income includes: a social security pension or benefit if the person is receiving a social security pension or benefit - the person's income maintenance tested amount (if any), and a pension or ISS, DFISA payable under the VEA, and a payment of compensation

Pensioner Concession Card Issued by Centrelink or DVA As per CSHC, plus state-based concessions eg: Energy State health concessions Rates and utilities Stamp Duty Public transport M/V registration Get if you receive any of these payments: Age Pension[1] Bereavement Allowance[2] Carer Payment[3] Disability Support Pension[4] Newstart Allowance[5] or Youth Allowance[6] as a job seeker if you are single, caring for a dependent child, and looking for work Parenting Payment[7] single You may also get a Pensioner Concession Card if you are aged over 60 and for more than 9 months have been receiving: Newstart Allowance[5] Parenting Payment[7] partnered Partner Allowance[8] Sickness Allowance[9] Special Benefit[10] Widow Allowance[11] You may also get a Pensioner Concession Card if you have a partial capacity to work and you are receiving: Newstart Allowance[5] Parenting Payment[7] partnered Youth Allowance[6] as a job seeker If you find a job, you may be able to keep your Pensioner Concession Card for a short time. From 1 January 2014, customers who are no longer eligible for Parenting Payment single, due to their youngest child turning 8 years of age, will still be entitled to their Pensioner Concession Card for a period of 12 weeks from the date their payment is cancelled.

Strategies Asset reduction Pensioner bonus scheme – apply early for bonus if not already receiving income support Residential aged care – if pension reduces think about renting out home to generate cashflow – but beware, Centrelink assessment of former home (rented out) changes from 1 January 2017. Affects people who entered care on or after 1 January 2017. Rental income assessable Value of home assessed as asset after 2 years of entering care

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