1. Pension Deeming Rules What do they mean for you? is an Authorised Representative of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429 Current as at 21 August 2014

2. Pension deeming rules Since the Government replaced allocated pensions with account based pensions on 1 July 2007, pensioners had the ability to take a superannuation income stream with little or no income assessed by Centrelink. To prevent this, current social security ‘pension deeming rules’ that apply to financial investments will also apply to account based pensions from 1 January 2015 (exceptions apply). This measure was originally announced on 5 April 2013 by the previous Federal Government. 1 Background

3. Family situation For full pension (pf)* For part pension (pf)** Singleup to $160.00 less than $1,845.60 Couple (combined) up to $284.00 less than $2,825.20 Illness separated (couple combined) up to $284.00 less than $3,655.20 The income and assets test Income test for pensions 2 Assets test limits for Allowances and Full Pensions Income over these amounts reduces the rate of pensions payable by 50 cents in the dollar (single), 25 cents in the dollar each (for couples). For transitional or saved cases income over these amounts reduces the rate of pension payable by 40 cents in the dollar (single), 20 cents in the dollar each (for couples). Family situation For homeowners For non- homeowners Single$202,000$348,500 Couple (combined)$286,500$433,000 Illness separated (couple combined) $286,500$433,000 One partner eligible (combined assets) $286,500$433,000 Some assets are deemed to earn income, while certain assets are not included in the assets test. Contact us for more information. For pensions, assets over these amounts reduce pension by $1.50 per fortnight for every $1,000 above the amount (single and couple combined).

4. Upcoming changes – deeming of account based pensions From 1 January 2015 new pension deeming rules come into effect for account based pensions. Social security deeming rules applying to financial investments will apply to: –Account based income pensions with a commencement date of 1 January 2015 or later, OR –Account based pensions with a commencement date before 1 January 2015 and the individual was not receiving an income support payment immediately prior to 1 January 2015 or cease receiving an income support payment from 1 January 2015. 3

5. Deeming rates – historical comparison 4 DateBelow the thresholdAbove the thresholdDeemed investments of $100,000 20/03/20043%5% $4,288 1/07/20043%5% $4,272 1/07/20053%5% $4,256 1/07/20063%5% $4,232 20/03/20073.5%5.5% $4,732 1/07/20073.5%5.5% $4,712 20/03/20084%6% $5,212 1/07/20084%6% $5,180 17/11/20083%5% $4,180 26/01/20093%4% $3,590 20/03/20092%3% $2,590 1/07/20092%3% $2,580 20/03/20103%4.5% $3,870 1/07/20103%4.5% $3,852 1/07/20113%4.5% $3,831 1/07/20123%4.5% $3,819 20/03/20132.5%4% $3,319 1/07/20132.5%4% $3,301 4/11/20132%3.5% $2,801

6. Post January 2015 – not grandfathered 5 Marital statusThresholdDeemed Amount Single Up to $48,000 Above $48,000 2% $960 + 3.5% above $48,000 Pensioner Couple 1 (combined) Up to $79,600 Above $79,600 2% $1,592 + $3.5% above $79,600 Non-pensioner couple 2 (each) Up to $39,800 Above $39,800 2% $796 + 3.5% above $39,800 1. At least one member of the couple is receiving a pension 2. Applies for an allowee couple or allowee/non-recipient couple Government intention is to reduce thresholds to $30,000 for singles and $50,000 for couples.

7. Example – A new income stream commenced post 1 January 2015 Effects of deeming Mark is single A homeowner Has $10,000 personal effects Has $400,000 account based pension 6 Deeming rateAmount deemed Up to $48,0002%$960 $352,0003.50%$12,320 Total deemed$13,280

8. Comparing pre and post 1 January 2015 arrangements Effects of deeming Revisiting Mark - $400,000 account based pension also earns $20,000 from part time employment Post 1 January arrangement –Account based pension (deemed) $13,280 (deemed) –Age pension$10,602 Pre 1 January grandfathered arrangement –Account based pension$0 –Age pension$13,800 7

9. Grandfathering rules in place: Account based pensions commenced pre 1 January 2015 Receiving an income support payment immediately before 1 January 2015 Continues to receive an income support payment after January 2015 Pre 1 January 2015 account based pension Why do you need to amend/start pension accounts now? 8

10. Example – Deductible amount Potential impacts of changes 3 years ago Andrew purchased an account based pension with $430,000 (non- reversionary), deductible amount $23,193 Current balance is $400,000. Andrew is 68 (life expectancy 16.24) and his wife Victoria is age 65 (21.62) 9 Start a new income stream Calculation Deductible amount Reset the deductible (no reversionary) $400,000 / 16.24 $24,630 Add Victoria as a reversionary $400,000 / 21.62 $18,501

11. Things to consider before 31 December 2014 Reset your deductible amount? Consolidation of accounts? Contributions? Withdrawal re-contribution? Do you have the right provider? Add reversionary to secure continued grandfathering? Commute to remove a reversionary beneficiary and increase the Centrelink deductible amount? 10

12. A reversionary pensioner cannot be added to an existing pension account. A new reversionary can only be added at the time a new pension account is commenced. This could vary across products. Possible exit fees Loss of insurance cover (if transferred too early) Centrelink impacts (deductible or non- assessment amount) Transaction costs moving from one pension to another Key questions Can I add a reversionary pensioner to an existing pension account? 11 What are the potential impacts of transitioning into a new pension account? Key tip: If you stop your income stream and start a new one from 1 January 2015, your income stream will be deemed.

13. Likely scenarios to consider

14. Consider the effects on your Centrelink deductible amount (increase or decrease) Consider the effects of any other benefits (e.g. linked insurance policies) Review and assess cost impacts Combining multiple pension accounts Scenario 1 13

15. These actions will trigger a new pension Consider impact on grandfathering provisions if not completed prior to 1 January 2015 There may be different outcomes depending on the commutation of income streams – consider your best approach Re-contribution strategy or resetting a Centrelink deductible or non-assessable amount Scenario 2 14

16. Disclaimer The information (including taxation) in this document is general advice only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this advice you should consider the appropriateness of this advice, having regard for your own objectives, financial situation and needs. You should seek personal financial advice from a qualified financial adviser before acting on the advice. RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. 15 Important Notice

17. Questions? is an Authorised Representative of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429