Age pension entitlement… Am I receiving the correct age pension?

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It is a question that is often asked. Unfortunately, it is not always fully explained by the correspondence from Centrelink or Veterans Affairs.

On 20 March 2021 the Age and Service Pensions were increased, the first increase in 12 months. Pensions are normally adjusted or increased twice a year in March and September, but because of a negative CPI figure last year, there was no increase to the pension rates in September 2020.

The single pension was increased from $944.30 per fortnight to $952.70 per fortnight and the couples combined pension was increased from $1,423.60 per fortnight to $1,436.20 per fortnight.

Some pensioners will not see any increase in their pension and may in fact see a decrease.

Why would this be the case?

In addition to adjusting the pension rates for movements in the CPI in March and September of every year, Centrelink and Veterans Affairs also automatically review and adjust the value of a pensioner’s investments in Shares and Managed Funds.

Since September last year the share markets in Australia and around the world have grown substantially. For example, the Australian market has grown by approximately 16%, the UK market by 14%, the Hong Kong market by 21% and the US market by 22%.

The downside for pensioners who are receiving a part pension and are invested in these areas either directly or through managed funds is that they may see a decrease in their pensions because of an increase in the value of their investments.

It is extremely important for retirees who are receiving a pension from either Centrelink or Veterans Affairs to remember that your entitlement is based on your income and assets and any movement in these values can have an impact on your entitlement. Therefore it is imperative for pensioners to ensure that the information that Centrelink or Veterans Affairs hold is correct and up to date.

If the market were to fall as it did at the beginning of last year, you do not have to wait for the automatic review by Centrelink or Veterans Affairs in March and September. You can ask for a manual review to be conducted on your entire portfolio.

Please be careful when requesting a manual review. If you have one investment which is not performing, you are not able to request a review of just this investment, the review will be conducted on your entire investment portfolio.

If you are unsure of your correct entitlement based on your current share or managed funds portfolio, please speak to an expert.

 

 

Source:  Mark Teale | Centrepoint Alliance

Compulsory super – a bit of a problem child?

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The current debate is whether compulsory employer superannuation contributions (generally referred to as “super guarantee” or “SG”) should be increased from 1 July 2021 or be deferred or possibly even suspended.

Back in the mid-1980s compulsory super was first introduced as trade-off for a national wage increase. It was referred to as award super, and required employers to contribute 3%, starting at 1%, of a person’s salary or wage to a superannuation fund.

By June 1988, just on half of all employees were receiving superannuation from their employer.

The Labor Government introduced SG legislation that commenced on 1 July 1992. The rate of SG contributions would progressively increase from 3% to 9% between 1992 and 2002.

By November 1993, 80% of employed people were making super contributions, or had them made (by an employer) for them. In many ways, SG had become “almost” universal for employees.

At one point, back in the 1990s the Keating Labor Government proposed supplementing SG contributions with a compulsory employee contribution starting at 1% and increasing to 3% by 1999-2000. This idea was abandoned when the Howard Liberal Government took office in 1996.

In 2010, in response to the Henry Review, the Coalition Government proposed increasing the rate of SG to 12% by 2019-20. This was legislated, however the dates have been tweaked along the way as successive governments of both persuasions have played with the system. The SG rate is not due to increase to 12% until 1 July 2025.

Where are we today?
The SG rate is due to increase from the current 9.5% to 10% from 1 July 2021.

However, as many businesses suffered following the lockdowns imposed by the outbreak of COVID-19 in early 2020, many are arguing that increasing the SG rate to 10% from 1 July 2021 is a step too far in the current economic environment. Any discussions by our political leaders on deferring the July increase has become highly politically charged. One of the major critics of any deferral is the superannuation sector which makes its money from the inflow of superannuation contributions.

What to expect?
As things presently stand, the government can go one of two ways.

They can either stick with the scheduled increase to 10% from 1 July 2021 – after all that is enshrined in legislation – or they can introduce an amendment to defer the next, and possibly future increases. However, if seeking to table amending legislation, the government may not have the numbers to support a deferment.

At this stage, I suspect we will hear more about this as we approach the Federal Budget which is expected to be delivered on 11 May 2021.

If you are looking to maximise your retirement savings, consider seeking the advice of a qualified financial planner.

 

Source: Peter Kelly | Centrepoint Alliance