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Financial Stimulus for Older Australians

The Commonwealth Government recently announced stimulus measures to counteract the effects of falling interest rates and plummeting share prices that have arisen from the COVID-19 pandemic. 


08 Apr 2020

Older Australians living in residential aged care will now reap the benefits of the stimulus measures in the following ways:

  • Reduction in account-based pension minimums.
  • Cash Payouts.
  • Cut in Deeming Rates.

 

On 22 March 2020 the federal government announced that the minimum pension drawdown rates would be temporarily halved for the 2019/20 and 2020/21 financial years.  This is due to many retirees losing a significant portion of their super account balance as share markets have recently plunged. This rule change assists retirees who do not wish to sell their investment assets while the value of those assets is reduced.

 

The temporary reduction in pension drawdown rates will benefit retirees with account-based pensions and similar products.  This includes allocated pensions and market-linked pensions (also called term allocated pensions), as well as transition to retirement pensions.

 

By preserving more of their capital, they will have more money working for them to capture the market upswing when it occurs.  Not included are defined benefit pensions such as lifetime or life expectancy products.

 

Residents who receive a means-tested pension (Centrelink/Veterans’ Affairs) or hold either a Commonwealth Seniors Health Card or Veterans Gold Card will receive two $750 cash payments as a boost to income.  The payments will occur in April and July are tax-free and not assessable.

 

Also, on the 01 May 2020 deeming rates will be cut by 0.75 per cent from 1 % to 0.25% which may lead to a higher pension entitlements and lower aged care means-tested fees.  Pensions will not change if the maximum pension is already received or entitlements are calculated under the assets test.

 

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