NetActuary

Centrelink Thresholds 2018-19

The 2018-19 allowable income and asset thresholds for a full Age Pension are now available.

From 1/7/2018 the allowable income threshold will increase for singles from $168.00 p.f. to $172.00 p.f.  For couples the increase is from $300.00 p.f. to $304.00 p.f.   Deeming lower limit has increased from $50,200 to $51,200 for singles and from $83,400 to $85,000 for couples.

With asset thresholds the Homeowner threshold has increased from $253,750 to $285,500 for singles and from $380,500 to $387,500 for couples.   The Non-Homeowner thresholds have increased from $456,750 to $465,500 for singles and from $583,500 to $594,500 for couples.    Funeral Investment exemption from the asset test has increased from $12,750 to $13,000.

The ATO has released SMSF News Alert 2018/3 confirming the unintended consequences of the current law with regards to the commutation of capped DB life expectancy and market-linked pensions.  These receive a nil debit on commutation.  The ATO will not take compliance action at this stage if a fund does not report the transfer balance cap events of the commutation or commencement of the new market-linked pension.   This still does not fix the problem of the lock in of a market-linked pensions that are larger than $1.6m.   There are a number of problematic areas of tax and superannuation with no clear guidance from the ATO, especially in the transfer of overseas pension monies area.

It is going to be a very interesting in a few weeks time to watch how administrators and trustees handle the new ATO interpretation for mixed segregated and unsegregated periods for exempt pension income with the 2017-18 financial year.   I have a considerable level of apprehensive about this.  If you would like to discuss issues to watch out for, please don't hesitate to call me on 03-6224 1145.

 

Brian Bendzulla 

 

 

 

Wouldn't it be “Loverly”

In a similar manner to superannuation funds needing to have an investment strategy, there will be a requirement to satisfy a “retirement income covenant”.  This basically codifies the requirements and obligations for trustees to help improve retirement outcomes.  The implementation date is likely to be 01/07/2020.  The funds will need to offer a Comprehensive
Income Product for Retirement (CIPR) that has three key objectives.  These are to maximise income; provide income for life; and flexibility to access capital.  It may (for example) be a product that is a combination of an ABP and a deferred annuity.  Now that we know the social security means test rules for new and existing pooled lifetime income products it will be
feasible to design such products.

Wouldn’t it be “loverly” if that was all that was needed to solve the retirement issues!  It is not going to be that simple – especially for financial planners who need to justify what they are suggesting is superior to the default option.  Actually, it’s default “options” as the fund can offer up to three CIPRs.

As usual, there are trade-offs that need client preferences to be taken into account.  An annuity may have certainty and handle longevity, inflation and investment risk – but those guarantees come at a considerable cost to maximizing income.  Flexibility, desire to leave an inheritance, health, organization, solvency, tax, Age Pension ramifications etc. are going to be relevant.  Luckily the methodology for assisting with these trade-offs are well developed.  NetActuary is willing to develop the analytic tools for those who are going to seize the opportunity.  First, however, we have an actuarial certificate area to relaunch in (hmmmm) … 23 days!

 

Brian Bendzulla