In an article for the website Super Review, Jassmyn Goh talks about how part pension changes effected through the Federal Budget will affect thousands of SMSF trustees and members. Close to 90,000 fund members are set to lose their part pension fully whereas an estimated 250,000 will face an erosion of the part pension. The scope of the Federal budget change is quite evident in the changed mood of the SMSF trustees and members across Australia.
Assets-free threshold and tapering rate
Come 2017 and the assets-free threshold will rise up to $375,000 for couples and $250,000 for singles. The tapering rate will rise to the realm of $3.00 per $1000 (implied over the asset threshold). It is presently at the $1.50 mark. Experts feel there will be no difference in how the principles of capital preservation and wealth generation are perceived but there needs to be a reassessment of strategy in regards to the retirement goal.
It is crucial to understand that the industry will definitely be hit by a domino effect wherein trustees would move from means-tested assets to the non-means tested ones. It is such movements that need to be avoided in the first place.
You can read the original article here.
Taper rate to hit those a decade away from retirement hard
In my opinion, those who are likely to retire in the next 10 or 15 years will find the taper rate changes most difficult to counter. Presently, for each extra $1000 above the lower threshold, SMSF trustees lose $1.50 in fortnightly pensions. From 2017, this amount will be $3.
Government’s ineffective consolation
The government is busy spreading cheer, claiming that those couples with assets- excluding the family home- in deficit of $451,000 will come out completely unaffected by the Federal budget change. If at all any implication will be there for them, it will be a positive one and not otherwise. This, however, is little cause for consolation.