I believe we live in the best country in the world.
I believe we have so much going for us.
I believe we are very, very lucky to live in Australia.
I believe we have one of the best health & welfare systems in the world, and our Government does a lot right.
But as an adviser to many Age Pensioners and part Age Pensioners there is one thing that is totally driving me nuts at the moment!
Why is the Government pushing for age pension changes that are supposed to be making the system more fair, more sustainable and targeted to helping those with less get more, but letting those with sometimes incredibly high levels of personal assets collect more than others with significantly less?
I am seeing panic, concern, rash, stupid decisions and long-term behavioral changes happening as a result of the current crack down on the Age Pension Assets Test by those who have made sacrifices and saved hard to self-fund their own retirement.
As an adviser based in Melbourne’s Western Suburbs the average home value of my clients is around $400,000. Many of my clients have worked hard their whole lives to build savings to support them in retirement (as the Government wants them to do) and many of my coupled clients’ have non-property assets of around $500,000 that we need to make last for their entire retirement.
This level of savings though from the 1st January 2017 will result in a reduction to their Age Pension.
However many of my colleagues have clients with similar levels of liquid assets, but depending on the area they live in, have clients with homes valued from $500,000 – $2,000,000 +
Their total wealth can be anything from double to quadruple the wealth of my clients, however their age pension entitlement is the same? How is that fair?
Why is the Government being so blatantly discriminatory against the poorer members of our community? Why don’t they just put a cap on the untested value of the principle residence of say $500,000 or $750,000 or $1,000,000?
This way those with massive wealth in their homes will have to partially self-fund like many of my clients have to do (who don’t have anywhere near as much). This will save the Government money in Age Pension funding, and stop people squirreling away money into their homes to “hide” it, which is becoming the “new strategy” of hearsay.
Age Pensioners are selling up and buying bigger homes to beat these changes – at a time they should be relaxing, or downsizing for future simplicity. This is taking liquid assets away from their use, and making the Government pay them more with no advantage to themselves or the economy. How is this helping with budget savings? This is also making things more difficult for these people when it comes time to enter Aged Care.
If people have very high value homes, well done and good luck to them. But they shouldn’t be getting the same level of government support as those with significantly less. This is inequitable and unsustainable and I believe this policy needs to be changed. If they have other high value assets no-one believes they should be fully Government funded, why is the home so different?
However despite this issue, remember that your goal in retirement is to be comfortable and have sufficient income for the rest of your life. The source is not as important as the outcome. Planning can help you relax knowing that you can achieve this. Planning can also help you make the most of all Age Pension options, no matter how fair or unfair the system is.
Above all; don’t make any rash decisions, diversify your income sources, make the most of every dollar, and enjoy yourself.
The rules will change again, and again, and again. Rational, sensible planning will help you no matter what happens. Properly advised clients can tell you that!
Authorised Representative of Aon Hewitt Financial Advice Ltd
Aon Hewitt Financial Advice ABN 13 091 225 642 AFSL No. 239183
This information may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.