JANUARY 1 is now locked in as a significant date for many retirees. That's when the rules regarding the age pension and the Commonwealth Seniors Health Card (CSHC) will change.
The majority of existing age pensioners and CSHC holders will not be affected. However judging by the emails that are pouring in, there is still a lot of uncertainty and worry out there.
The following is typical. " Can you confirm that after 1/1/2015 occasional withdrawals of cash lump sums, and increasing or decreasing the annual pension payable from a superannuation account (account based) will not trigger the new deeming rules? Some financial writers and my superannuation fund in particular , are saying that future cash withdrawals will constitute a product change and thus trigger the new deeming rules!
Further would changing the investment nature (i.e. cash to balanced) constitute a product change and therefore trigger the new deeming rules?
I am confused!!"
With bad advice like that it is no wonder he is confused.
The good news is that grandfathering arrangements for account based income streams will not be affected by partial lump sum withdrawals, increasing/decreasing annual payment amounts or changing the underlying investments of the income stream. To lose the grandfathering entitlement, the existing income stream must cease. This would generally occur when changing product providers or commencing a new income stream with the same provider
Yes, it's complicated stuff, and I urge you to take advice sooner rather than later. Depending on your own situation, there may be strategies such as restarting an ABP to lock in a higher deductible amount if the account balance has risen significantly since the pension started, amalgamating additional super benefits and restructuring beneficiary nominations that improve your situation.
The sting in the tail is that anyone who changes income stream providers after January 1 will lose the protection of the grandfathering rules for both CSHC and aged pension purposes. We are probably only 20 working days from the deadline, as most financial advisory firms will be closed between Christmas and New Year. It's a wake up call to act urgently if you intend to change providers. Leave it till the last minute and you're certain to miss the boat.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: email@example.com.
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