D-Day for pensioners is approaching

Transition to Retirement

With important new deeming rules coming into effect on 1 January 2015, now is the time to review your superannuation and pension arrangements to ensure you don’t miss out on valuable Social Security entitlements.


Account based pensions have generally been given favourable treatment when Social Security assesses your eligibility for benefits such as the Age Pension and the Disability Support Pension. As a result, many people with account-based pensions are currently able to receive valuable government support, topping up their own pension account payments to help their retirement savings last longer.

This is set to change from 1 January 2015, when new ‘deeming’ rules come into effect for account-based pensions making them subject to the same ‘deeming’ rules that currently apply to financial investments (exceptions apply). It is therefore important to review your Social Security entitlements now and make any changes well before 1 January 2015 as account based pensions commenced prior to this date for an income support recipient will not be subject to the new deeming rules (unless you move your balance to a new account based pension or the income support payment ceases from 1 January 2015).

Equally important is to assess whether setting up a new account based pension prior to this date would be beneficial for you.

How does ‘deeming’ work?

When Social Security assesses your eligibility for support payments, they assess you under the Assets Test and the Income Test, both of which you must satisfy before you can receive any benefits.

Under the Income Test, instead of asking you to declare how much income you’re actually earning from your financial investments, Social Security ‘deems’ that you are earning a certain percentage based on the level of assets you have.

The current deeming rates (effective 1 July 2014) are:
• 2%p.a. on investments up to $48,000 for a single (up to $79,600 for a pensioner couple)
• 3.5%p.a. on investments over $48,000 for a single (over $79,600 for a pensioner couple).

For example, if you commence your account-based pension after 1 January 2015, are single and have an account balance of $300,000 you would be deemed to earn $9,780 p.a. for the purpose of the Social Security Income Test (assuming no other financial investments, based on current deeming rates and thresholds).

What does this new ‘deeming rule’ change mean for you?

If you have an account based pension opened before 1 January 2015, your account will not be subject to deeming if:
• you receive Social Security income support payments immediately before 1 January 2015, and
• you continue to receive Social Security income support payments from 1 January 2015.

However, the new rules may affect you if you don’t meet either of these requirements, or if you move your balance to a new pension account from 1 January 2015.

If you haven’t yet opened an account-based pension, and you are currently eligible to do so (e.g. if you are aged 55 or over), there may be benefits in starting an account based pension and applying for Social Security income support payments (where eligible) before 1 January 2015.

Even if you don’t think you’re eligible for Social Security benefits, you may still be better off commencing an account-based pension sooner, as investment income generated in an account-based pension account is exempt from tax.

Act now to ensure you don’t miss out!

If you are receiving a Social Security income support payment or may be eligible to receive one, it’s a good idea to review your circumstances now to ensure that you are best placed before the new deeming rules come into effect on 1 January 2015.

To find out more, or to discuss your situation please call Carrington Financial Services on (08) 8272 6444 or email us on reception@carringtonfs.net.


This information is issued by Carrington Financial Services. Please note that the information is based on Carrington Financial Services interpretation of the changes as at the date of issue of this document. Accordingly, you must not do or refrain from doing anything in reliance on this information without obtaining suitable professional advice.

Whilst every effort has been taken to ensure the information used is accurate and reliable, no warranty is given as to the accuracy of the information and no liability is accepted for your reliance on the information.

The information is of a general nature and may not be relevant to your individual circumstances. Before making any investment decision you must consider the relevant PDS. PDSs are available on request by calling Carrington Financial Services.

Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Before making any investment decision you need to consider whether there are any adverse consequences for you, including exit fees, other loss of benefits or increase in investment risks.

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Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making  any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.