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Australia: $800,000 to keep up with pension
South Australia Advertiser
July 1, 2003 Australia -
Self-funded retiree couples now need $800,000 in interest earning assets
to be as well off as Centrelink aged pensioners, a South Australian
economist has warned. Lowering of
interest rates may prove a short-term boon for mortgage holders but
retirees surviving on returns from their decades of savings are feeling
the pinch as the rate of return reduces when interest rates fall. "A self-funded
retiree couple needs to hold at least $800,000 in interest-bearing assets
to deliver an income equivalent to a Centrelink pension," Mr Gobbett
said. "Already many
retirees who pay their own way are worse off than people who are getting a
Centrelink pension. With falling interest rates obviously a lot of
self-funded retirees are going to be left worse off again." From today,
Centrelink is indexing its assets limit test for pensioners, potentially
allowing more people to qualify for assistance. For a single
homeowner, the allowable assets limit increases by $4250 to $149,500,
while for couples the limit rises by $6000 to $212,500. Those who do meet
requirements would hold little more than their family home in assets. In comparison to
self-funded retirees, from today, a couple receiving a Centrelink pension
receives a maximum of $768 a fortnight, including a pension supplement and
pharmaceutical allowance, plus rent assistance of up to $88. A single
pensioner is entitled to up to $555.60 a fortnight, including rent
assistance. Mr Gobbett called
on the Federal Government to reassess thresholds for Commonwealth
assistance. "In the first
instance the Government should move quickly to bring into line the deeming
rates," he said. Deeming rates are
the interest rates the Government assumes retirees are receiving for their
investments. The rate is used to
estimate the income and therefore the eligibility for assistance but there
is always a delay in resetting the rate when interest rates drop, which
causes the Government to overestimate returns for some time. O'Halloran Hill
resident Tony Hodgkiss plans to receive a part pension payment from the
Government by the end of the year. "I am
self-funded at the moment and because I have taken control of my
investments I've been pretty happy with my returns," he said.
"But falling interest rates have made it harder and I have had to
spend some of our capital." Garrisons Financial
and Retirement Specialists adviser Yoni Carter predicted retirees would
lose some assets under the interest rate climate. "Obviously lower interest rates mean retirees will tend to use more capital to provide the quality of life they aspire to," she said. Copyright
© 2002 Global Action on Aging
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