Don’t blow money to battle pension changes, experts warn

RETIREES have been spending up big time to protect their pensions, but experts have warned them that it might not be the best option.

‘Hands off my pension’ is the cry from retirees across Australia as new rules start this month.

RETIREES worried about losing money under tougher new Centrelink rules are being warned to avoid going on a spending spree that reduces their assets but protects their pension payments.

As hundreds of thousands of pensioners receive a cut this month, financial specialists say the worst thing they can do is waste their money to try to keep more pension.

January 1 brought changes to asset limits for pensioners, and doubled the rate at which their payments reduce.

Almost 315,000 pensioners are losing some entitlements, including 88,500 having their pension cancelled, while 166,000 get more money.

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Financial adviser Theo Marinis has urged retirees to be cautious about reducing assets.

Financial strategist Theo Marinis said he had been contacted by many concerned retirees, some who already had spent money to lower their assets and others who were unaffected by the changes but were still panicking.

“The problem with blowing your money to qualify for Centrelink is once the money’s gone, it’s gone. If you are a retiree you have no way of getting it back,” he said.

Under the new rules, a homeowner couple can have $375,000 and still receive the full age pension, while their part pension is cancelled if their assets exceed $816,000.

For single homeowners, the full pension is paid on assets under $250,000 and no pension is paid on assets above $542,500. The family home is not counted.

Baillieu Holst financial adviser Mike James said he had spoken with retirees who faced income shortfalls of up to $12,000 because of the changes.

“Some retirees have been spending up ahead of January 1 to reduce their assessable assets,” Mr James said.

Department of Human Services general manager Hank Jongen is under fire over the Centrelink debacle.

Department of Human Services general manager Hank Jongen said letters had been sent to pensioners whose payments were being cancelled or reduced.

“Pensioners who have had their pension payment cancelled can reapply if their assets fall below the assets test cut-out relevant to their situation,” he said.

Mr Marinis said affected retirees would eventually receive more pension as their assets naturally reduced during their retirement.

“A lot of people are going to do foolish things, blow their money, and it’s going to cost the government more down the track. I think this is a stupid policy,” he said.

Mr Marinis blamed “bozos in Canberra” — bean counters and mandarins — for the changes. “What are they smoking? They’re on something, because nobody thinking logically makes these half-baked rules.”

Victorian mum Christine Bingam has been caught up in the furore. She owes $2251 but has no intention of paying. Picture: Matt Thompson

“For example, spending $25,000 on a holiday or kitchen renovation may generate an extra $1950 in age pension over the year,” he said.

Other strategies to reduce assets included moving money into the superannuation of a spouse below pension age, buying prepaid funeral bonds, gifting money or forgiving loans to children, Mr James said.

StatePlus head of advice process Suzanne Doyle said it was generally a bad idea to reduce assets to gain extra pension, but could be a “reasonable decision” in some circumstances, such as bringing forward planned renovations to the family home.

“This occurs because the primary residence is not counted in the assets test,” Dr Doyle said.

“If you are concerned about the changes, you should seek professional financial advice.”

Originally published as Don’t blow money to battle pension changes, experts warn