12-Oct-2009

21 September 2009

Federal Budget Pension changes come into effect

The Federal Budget pension changes took effect from 20 September 2009.

Most Disability Support Pension recipients who earn an income will receive the full pension
increase of $32.50 per week, but will be assessed at a new higher withdrawal rate as a
trade-off.  NDS wrote to the Government welcoming the pension increase but opposing the
increased withdrawal rate.
 
The pension withdrawal rate will increase to 50 cents in the dollar (up from 40 cents) for all
new and most current pensioners. The withdrawal rate will apply to income earned above a
threshold of $71 per week.
 
FaHCSIA has provided NDS with scenarios comparing the effect of the new income test
against the transitional income test. The scenarios demonstrate that existing single
pensioners will be better off under the new pension system (and receive the full pension
increase) until they earn $304 per week in private income.
 
Due to the effect of the increased pension withdrawal rate, the Government will allow
transitional arrangements to apply to current pensioners adversely affected by these changes.
 
FaHCSIA applies two different maximum weekly pension amounts in these scenarios based on the designated withdrawal rate. The maximum weekly pension rate assessed under the new system is $335.95. The withdrawal rate in this scenario is 50 cents in the dollar. The maximum weekly pension rate assessed under the transitional system is $312.45 and the withdrawal rate is 40 cents in the dollar. Single pensioners paid under the transitional system receive a pension increase of $10.10 per week.
 
For pensioner couples the maximum weekly rate for the new system is a combined amount of $505.80 and a combined amount of $504.70 for the transitional system. The new threshold amount for pensioner couples is $124 per week combined.
 
The new weekly rates above include the relevant indexation rates and applicable pension increases announced in the Federal Budget.
 
The transitional arrangements are designed to ensure that current pensioners are no worse off due to the introduction of the new higher withdrawal rate. Once paid under the new rules, pensioners no longer have access to the transitional arrangements.