2016 Centrelink Age Pension Asset Test Changes 1st Jan GAVIN MARTIN Financial Advisor Cornerstone Wealth

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1 2016 Centrelink Age Pension Asset Test Changes 1st Jan 2017 GAVIN MARTIN Financial Advisor Cornerstone Wealth

2 Gavin Martin Financial Adviser Cornerstone Wealth Phil Watson Digital Marketing Coordinator Christian Super

3 Disclaimer Gavin Martin and Cornerstone Wealth are Authorised Representatives of Lonsdale Financial Group Ltd ABN AFSL The content of this presentation is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this presentation, you should assess your own circumstances or seek advice from a financial planner and seek tax advice from a registered tax agent. Information is current at the date of issue and may change. Cornerstone Wealth All rights reserved. No part of this presentation may be reproduced in any form without the prior permission of the copyright owners.

4 What s the process? Your Preparation 'Discovery' meeting Strategy Presentation Implementation of your financial life strategy Ongoing Monitoring and Review What s involved? How long does each meeting take? Complete a questionnaire prior to our first meeting. Discover together your financial life values, goals and objectives and the probability of achieving them. We work with you to agree what actions to take to achieve your goals and objectives. We work with you and your other professional advisers to implement your financial life plan. 30 minutes minutes 60 minutes 60 minutes Review of your investment portfolio and financial life plan. What s the duration between meetings? 1 week from the initial contact to the discovery meeting 2-3 weeks from the discovery meeting to the strategy presentation 6-8 weeks from strategy presentation to completion of implementation 6 12 months from completion of implementation to the annual review

5 Retirement Planning Webinars Retirement Planning 25th July When 2. How much 3. Phases How Centrelink to Transition changes to 1st Retirement January th 15th August August Salary 1. The Sacrifice changes 2. Pensions 2. Effects on you 3. Tax 3. What free income to do Capital Gains and Wealth Transfer 7th September Tax on asset sales 2. Maximise Estate 2015 Recording for now

6 Bonus Centrelink Age Pension Asset Test Changes 1st January Applying for the Centrelink Age Pension 2015 Centrelink Income and Asset Strategies Work

7 Questions? If you have questions during the webinar... Please use the Chat/Question section on the panel on the right hand side of your screen. I ll answer your question where it relates to the current topic or defer it to the end of the presentation if that works better.

8 What is your Age poll?

9 Centrelink Age Pension Changes 1st Jan 2015 Deeming of Account Based Pensions 1st Jan 2016 Maximum 10% of Defined Benefit Pensions not assessable 1st Jan 2017 Asset Test Changes

10 Asset Test Thresholds 1st January 2017 Increase in the assets you may hold and still qualify for the full age pension Lower threshold (full pension) Cut-off threshold (no pension payable) Current Proposed Current Proposed Single homeowner $209,000 $250,000 $791,750 $547,000 Single non- homeowner $360,500 $450,000 $943,250 $747,000 Couple homeowner $296,500 $375,000 $1,175,000 $823,000 Couple non- homeowner $448,000 $575,000 $1,326,500 $1,023,000

11 Taper Rate Changes 1st January 2017 Increase in the taper rate means the full age pension reduces faster Lower threshold (full pension) Cut-off threshold (no pension payable) Current Proposed Current Proposed Pension $1.50 $3.00 / fn Single homeowner $209,000 $250,000 $791,750 $547,000 Single non- homeowner $360,500 $450,000 $943,250 $747,000 Couple homeowner $296,500 $375,000 $1,175,000 $823,000 Couple non- homeowner $448,000 $575,000 $1,326,500 $1,023,000 You lose $1.50 in age pension for every $1,000 in assets you hold above these current limits. From 1 January 2017 you will lose $3.00 in your pension for every $1,000 you have above the new limits.

12 Taper Rate Changes 1st January 2017 Increase in the taper rate means the full age pension reduces faster Lower threshold (full pension) Cut-off threshold (no pension payable) Current Proposed Current Proposed Single homeowner $209,000 $250,000 $791,750 $547,000 Single non- homeowner $360,500 $450,000 $943,250 $747,000 Couple homeowner $296,500 $375,000 $1,175,000 $823,000 Couple non- homeowner $448,000 $575,000 $1,326,500 $1,023,000 You lose $1.50 in age pension for every $1,000 in assets you hold above these current limits. From 1 January 2017 you will lose $3.00 in your pension for every $1,000 you have above the new limits.

13 Age Pension - Taper rate how does it work Pensions reduce at double the rate Ralph 68 years Single House $600,000 Not Asset Tested Car & Contents $20,000 Christian Pension $400,000 Cash $27,000 Shares $100,000 Total Assessable assets $547,000 Lower asset threshold $209,000 Assets over the threshold $338,000 $297,000 Taper rate $1.50 per $1,000 $ Maximum pension $ Current fortnightly Pension $ Cash $27,000 Christian Pension $400,000 $250,000 Proposed threshold $891 Taper rate $3 per $1,000 $ Maximum pension Nil Car & Contents $20,000 $9,539 p.a. lost Proposed Pension Shares $100,000

14 Age Pension - Taper rate how does it work Pensions reduce at double the rate Sally & Sam 68 & 72 years Married House $800,000 Not Asset Tested Car & contents $20,000 Christian Pensions $600,000 Cash $20,000 Shares $100,000 Total Assessable assets $740,000 Lower asset threshold $296,500 Assets over the threshold $443,500 Taper rate $1.50 per $1,000 $ $1, Taper rate $3 per $1,000 Maximum pension $1, $1, Maximum pension Current fortnightly Pension $ Cash $20,000 Christian Pension $600,000 $375,000 Proposed threshold $365,000 $11,174 p.a. lost $ Proposed Pension Shares $100,000 Car & Contents $20,000

15 Impact - homeowner couples *Based on projected pension rates at 1 January 2017.

16 Impact - homeowner single *Based on projected pension rates at 1 January 2017.

17 What can you do? Consider your options Reduce spending Increase withdrawals from income streams

18 Increased withdrawals - couple homeowners

19 What can you do? Consider your options Reduce spending Increase withdrawals from income streams Employment income - work bonus $6,500 p.a. Asset Test reduction Strategies Keith For every $100,000 over the lower Assets Test threshold the Age Pension is currently reduced by $3,900 p.a. ($100,000/$1,000 x 1.5 x 26) The economics behind divesting yourself of cash assets (i.e. spend, give away within the Doubling the taper rate will also double the reduction to $7,800 p.a. or 7.80%. limits etc) to meet the lower threshold

20 Income and Asset Test crossover points Provided by Challenger

21 Asset Test Reduction Strategies Be sure to weigh the pros of cons of your options Update your assets listed with Centrelink (e.g. cars) Spend money (house improvements, holidays) Gift money ($10,000 / year or $30,000 over 5 years) Super for spouse less than Age Pension age Funeral bond / prepaid funeral expenses Annuity with < 100% Residual Capital Value

22 There are various types and conditions What is an Annuity? Source of income for a defined period Regular income not subject to market movements. Can complement both the Age Pension and other investments like an account-based pension. Can have some social security benefits Two type of annuities: Term annuities Lifetime annuities

23 How do Annuities reduce assets tested? Provided by Challenger

24 Boosting the age pension Joe and Mary Tim (aged 70) and Sarah (aged 65) are a couple and own their home They have $250,000 each in account-based pensions (commenced in July 2015) drawing the minimum payment Their investor risk profile is 50% defensive and 50% growth They have $20,000 in personal assets and $10,000 in cash They are entitled to a combined Age Pension of $24,951 p.a. (20th March 2016 rate) under the Assets Test

25 Joe and Mary Age Pension entitlement Provided by Challenger

26 Joe and Mary Age Pension entitlement Provided by Challenger

27 Boosting the age pension Annuity considerations Limitation of what you can take out as a lump sum Locking in a fixed level of return Over the long term, an annuity might pay less than a market linked investment Increase in interest rates can reduce the withdrawal value

28 Further Resources Christian Super Help Desk Cornerstone Wealth Webinars Personal Financial Advice Lodge an enquiry via and I will contact you Call (1300 ASK GAV) to book an initial consultation