Around 68% of eligible Australians receive a full or part Age Pension, making it an important source of income in retirement. Strategies that help maximise Age Pension entitlements play a key role in retirement planning as they can increase a retiree’s cash flow or reduce the amount they need to draw from their own financial assets.
As you may be aware the Federal Government has introduced a raft of changes to the way they calculate certain benefits, these include –
- Pension Entitlements
- Allocated Pensions
- Aged Care Fee’s (for you or your elderly parents)
- Seniors Benefits.
These changes have already been passed by Parliament and WILL come into force over the next few months. And further changes have been forecast in the recent budget handed down only last week.
The changes can impact your ability to maximise your retirement from a financial point of view and may also impact your ability to enjoy your retirement to its utmost.
Lifetime annuities and the Age Pension
Lifetime annuities may enhance Age Pension entitlements for clients affected by both the Income and Assets Tests. Those impacted by the Income Test may see an immediate increase in their Centrelink or Department of Veterans’ Affairs (DVA) entitlements while those affected by the Assets Test may see an increase over time.
This is because part of the income received from the annuity does not count for the Income Test and the Asset value of the annuity reduces over time. We refer to this as the deductible amount.
As the majority of pension recipients have their pension reduced by the Assets test, a strategy to reduce assets in the eyes of Centrelink, without physically reducing their actual assets could be a very attractive proposition.
Implementing strategies that enhance Age Pension entitlements can mean you are better able to enjoy their retirement. You will rely less on their own savings, allowing those savings to last longer or enabling you to spend more in retirement.
Lifetime annuities are one of the few strategies that may assist under both the Income and Assets Tests whilst also providing a secure source of income.
For more information on Lifetime Annuities contact your PFG Financial Planner.