Australian retirees will need to rethink their retirement income approach if they wish to maintain their standards of living in 2017 due to the looming changes to superannuation rules, passed recently by the Government, which would see Australians working longer to maintain the same standard, according to a study by fund manager and pensions specialist.
Plato Investment Management said under the new rules, up to 300,000 part-pensioners were likely to be worse off following the 1 January, 2017 asset test changes and that retirees would need to generate 7.8 per cent to avoid going backwards.
Under the asset test changes, for example, a home-owning couple would lose access to a partial Age Pension if they held over $816,000 in assets which would translate into a reduction of $350,000 from the current rules.
According to Plato Investment Management, the reason for that was the doubling of the taper rate, which would see the current $1.50 per fortnight for every $1,000 in assets above the full pension assets test to double to $3 per fortnight under the new rules.
According to Plato Investment Management’s managing director, Don Hamson, part-pensioners would need to review their investment portfolio prior to 1 January, 2017.
“Pensioners wanting to maintain their income may need to consider the return potential of the Australian and global equities markets, and use investment strategies that prioritise income, as well as tap-into their status as ‘tax-free’ investors, harnessing the benefits of franking credits to deliver stronger returns,” he said.
“In our low-return world, we believe most assets classes will likely struggle to deliver 7.8 per cent p.a [per annum] in returns, especially the conservative asset classes such as cash and fixed income favoured by many in the pension phase.”
