A recent announcement of higher income thresholds for the Commonwealth Seniors Health Card (CSHC) has opened the ability to make changes to older Account-Based Pension funds without losing the card.
The changes to the income thresholds for the Commonwealth Seniors Health Card (CSHC) may allow people with a pre-2015 Account-Based Pension fund to change how those income streams operate without any concerns they may lose access to the card.
The announcement of an increase in income thresholds from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples has freed up pensioners with Account-Based Pensions funds that pre-date 1 January 2015.
Under the current rules, people with a pre2015 Account-Based Pension fund have their account-based pensions entirely excluded from the CSHC income test.
For a majority of those people the focus has been that since the rules changed in 2015, anyone eligible for this special deal has focused on not losing it (the CSHC). All financial planners know that it was very important to leave a pre-2015 AccountBased Pension fund alone and therefore it restricted what people could do with their pre-2015 pension.
In circumstances where the card was lost for some other reason, say their taxable income was particularly high one year and so they exceeded the threshold, they also lost their special treatment forever. The loss of the CSHC was detrimental for some retirees who relied on it for access to cheaper prescription medications, bulk billing for medical appointments, refunds of medical costs and, dependent on their location, reductions in electricity, gas, property and water rates and public transport costs.
With the new thresholds being so much higher there was less need to take a hands-off approach to their pre-2015 pension.
One of the great outcomes of this rule change is that it might allow some people who would benefit from a re-contribution strategy or change provider to transfer their pre-2015 pension accounts to a more modern fund.
Advice would definitely be required but there will be some people who may want to consider combining different pension accounts together or run down their pre2015 pension with additional payments, and leave their post-2015 pensions in place but have previously chosen not to because of the impact on their CSHC.
