FEDERAL BUDGET 2018 – How will it affect your retirement?
Whether retired or contemplating retirement, there are a few things you should know about changes made in the 2018 Federal Budget that could affect you and your financial future.
Examples of these changes, that will take effect from 1 July 2019, include:
- pensioners can now work longer and earn more;
- new retirees can contribute to their superannuation for another year;
- more older Australians can tap into the equity in their home via the pension loans scheme;
- more choice and flexibility in retirement income products, including options that provide income for life (note: these latter changes will not be in place from 1 July 2019 as it will take time for superannuation providers to develop and implement these products).
Expansion of Pension Work Bonus
The Pension Work Bonus is money earned by Australian pensioners that is exempt from the pension income test. This is over and above the income free amount per fortnight for pensioners (i.e. $168 for singles or $300 for couples).
(i) The Pension Work Bonus will increase from $250 to $300 per fortnight. Thus, the first $300 earned will be exempt from the pension income test.
(ii) Pension Work Bonus eligibility will be extended to self-employed pensioners who will be able to earn $7,800 per year self-employed with no impact on their pension.
A one-year exemption from the superannuation work test
Australians aged 65 to 74 can continue make voluntary superannuation contributions for 12 months after no longer meeting the work test (i.e. 40 hours minimum worked in any 30-day period during the financial year). Note: this applies only to those with a superannuation balance less than $300,000 at the beginning of the 12-month period.
Expansion of Pension Loans Scheme
If the bulk of your finances is tied up in your home but you don’t want to sell, you may be able to use the equity in your home via the Pension Loans Scheme to top up your pension.
(i) Eligibility of the Pension Loans Scheme has been extended to all Australians of Age pension age, even maximum rate pensioners.
(ii) Maximum allowable income stream from Pension Loan combined with Age Pension increased to 150 per cent of the Age Pension.
Expansion of retirement income options
To boost the standard of living of retirees, the government is working on a framework to provide retirees more choice and flexibility in the retirement income products they are offered and also to require providers to provide simplified standardised (easy to understand) information on their products. Furthermore, superannuation fund trustees will be required to develop a strategy to help members achieve their retirement income objectives and also to offer members the option of products that will provide income for life, no matter how long the member lives.
Even small changes can make a big difference to your future financial security so even in retirement, or especially in retirement, it is important to regularly review your finances in relation to the current financial and legislative environment. For peace of mind about your financial future, seek out sound advice from a qualified financial planner.