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Pension changes: tips to reducing assessable worth

While many may think it is macabre to discuss funeral arrangements, doing so in advance will help line your hip pocket in 2017, despite a reduction in pension eligibility thresholds. Editor, Alana Lowes, chats with Simplicity Funerals general manager, Luke Gregory, about how you can relax in retirement and get ahead of the pension changes.

Changes to the current pension eligibility criteria will see thousands of pensioners affected with some seniors set to lose some or all of there pension.

Coming into play 1 January 2017, the upper asset threshold for age pensions will reduce and the lower threshold increase leaving many seniors questioning their financial security.

Simplicity Funerals general manager Luke Gregory says while the changes are coming there are several assets that are exempt from the asset test that are worth exploring.

“With many retirees no longer making substantial income, financial preparedness is critical to maintaining preferable lifestyle standards.

“While there’s no one size fits all approach, it’s important for seniors to start looking at options now and exploring ways to reduce their assessable worth ahead of the 2017 change.

“A prepaid funeral for example is exempt from the asset testing and thus a great way to reduce your total worth and potentially safeguard your pension. This should be on the radar of all Australians who receive a pension before the year’s end,“ adds Mr. Gregory.

Looking specifically at the numbers, the lower threshold will increase to $250,000 for a single homeowner, $375,000 for homeowner couples, $450,000 for a single non-homeowner and $575,000 for a non-homeowner couple. Pensioners will also be subject to a new taper rate of $3 for every $1,000 above the new asset test free areas.

On the flip side, the higher threshold at which a homeowner couple no longer receives a part pension will drop from $1.18 million to $823,000, and to $547,000 for a single from $792,000.

“When you crunch the numbers, for a single or couple nearing close to the threshold of the asset limit, a prepaid funeral could be the deciding factor to whether or not to whether or not you still meet the pension eligibility criteria.

“Retirement is meant to be a time to sit back and relax, not worry about how much spare change is in the piggy bank,” says Mr Gregory. “But with the changes looming, it looks like many people will be giving up most or some of their pension.”

To take advantage of the benefits of a prepaid funeral, clients must have a contract with a funeral director that sets out the services to be undertaken noting that there are no more expenses to be paid. There is no set maximum value of this investment.

“Another advantage to purchasing a prepaid funeral is the ability to lock in a funeral at today’s prices even if the funeral will be far into the future. This can potentially save pensioners thousands as the cost is not affected by inflation,”

Mr. Gregory adds. The countdown to 1 January 2017 is officially on and with so much change due to take place, now is the time for clients to prepare and assess their options.