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Aged Care – the process

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What are the first steps that need to be taken to ensure that our loved ones, or in this example, my widowed mum, can effectively enter a residential aged care facility without too many dramas.

1. Complete an ACAT assessment
You can’t drive mum to the closest nursing home and ask if they have a room available for her. Your mum needs to have an ACAT assessment to say that she is eligible from a health perspective to enter residential aged care.

 What is an ACAT assessment?
ACAT stands for Aged Care Assessment Team. This is a team of medically qualified people who can assess your mum’s health and decide on a suitable plan to ensure your mum is cared for and receives the necessary medical care.

 How do I find my local Aged Care Assessment Team?

A very good government website myagedcare.gov.au will provide you with direction on applying for an assessment. After the assessment is completed, a letter will be forwarded to you or your mum in this example, outlining the level of care that she is entitled to receive.

It is important that the letter provides the necessary residential aged care approval to ensure mum can enter a residential aged care facility.

Once you have the correct ACAT Assessment letter, mum can now consider entering a nursing home.

 2. Figure out how much you need to pay?

There are forms that need to be completed and there are a couple of different forms which are relevant to a person’s circumstances.

In mums’ case, as she is a widow and in receipt of an age pension who owns her home, she will need to complete an SA485 which will ask questions concerning her home, its’ value and whether she is planning to rent the home or sell the property. They will not necessarily ask her about her other assets and income because Centrelink already has these details.

If mum was not in receipt of an age pension, she would need to complete a far more detailed and comprehensive SA457 form as Centrelink does not have any income or asset details.

If you are confident in using the internet, there is also a dynamic SA486 form that you can complete online which changes the questions on an ongoing basis depending on the answers you have provided to the previous question.

These forms are all available on myagedcare.gov.au, which provide a good explanation of who should be completing what form.

These forms can be completed before mum needs to enter the home so that mum and you, in this example are aware of the fees, but do not panic if you are not able to do so as they certainly can be completed after mum has entered the aged care facility.

A few weeks after completing and lodging the forms, mum will receive a letter from Services Australia outlining her fees and whether she needs to pay a Refundable Accommodation Deposit.

 3. You can now relax!

After mum enters the aged care facility her fees are reviewed on a quarterly basis in January, March, July, and September. The aged care facility will receive notification of the review and any possible change in the fees, with necessary adjustments being made for the fees which have been paid in the last three months.

So, even though mum is now safely residing in the aged care facility you still need to be diligent to ensure that mum’s fees are correct, and her financial circumstances are reviewed and kept up to date on a regular basis.

If you still are unsure of the process and have questions speak to an expert who can fully explain the issues you and your mum may face when it does come time for her to enter residential aged care.

 

 

Source:  Mark Teale | Centrepoint Alliance

Age pension entitlement… Am I receiving the correct age pension?

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It is a question that is often asked. Unfortunately, it is not always fully explained by the correspondence from Centrelink or Veterans Affairs.

On 20 March 2021 the Age and Service Pensions were increased, the first increase in 12 months. Pensions are normally adjusted or increased twice a year in March and September, but because of a negative CPI figure last year, there was no increase to the pension rates in September 2020.

The single pension was increased from $944.30 per fortnight to $952.70 per fortnight and the couples combined pension was increased from $1,423.60 per fortnight to $1,436.20 per fortnight.

Some pensioners will not see any increase in their pension and may in fact see a decrease.

Why would this be the case?

In addition to adjusting the pension rates for movements in the CPI in March and September of every year, Centrelink and Veterans Affairs also automatically review and adjust the value of a pensioner’s investments in Shares and Managed Funds.

Since September last year the share markets in Australia and around the world have grown substantially. For example, the Australian market has grown by approximately 16%, the UK market by 14%, the Hong Kong market by 21% and the US market by 22%.

The downside for pensioners who are receiving a part pension and are invested in these areas either directly or through managed funds is that they may see a decrease in their pensions because of an increase in the value of their investments.

It is extremely important for retirees who are receiving a pension from either Centrelink or Veterans Affairs to remember that your entitlement is based on your income and assets and any movement in these values can have an impact on your entitlement. Therefore it is imperative for pensioners to ensure that the information that Centrelink or Veterans Affairs hold is correct and up to date.

If the market were to fall as it did at the beginning of last year, you do not have to wait for the automatic review by Centrelink or Veterans Affairs in March and September. You can ask for a manual review to be conducted on your entire portfolio.

Please be careful when requesting a manual review. If you have one investment which is not performing, you are not able to request a review of just this investment, the review will be conducted on your entire investment portfolio.

If you are unsure of your correct entitlement based on your current share or managed funds portfolio, please speak to an expert.

 

 

Source:  Mark Teale | Centrepoint Alliance

Account based pensions and the age pension

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Would the rate of Centrelink or Department of Veterans’ Affairs age pension increase if the amount being paid from an account-based pension reduced?

The answer is very much a case of “it depends”. There are several factors that need to be considered:

1. If the full rate of age pension is being paid (i.e. currently $1,423.60 per fortnight, including supplements – for a couple, or $944 per fortnight, including supplements – for a single person), reducing the level of pension payments from an account-based pension will not result in a change to the rate of age pension being paid.

2. If a part age pension is being paid and the age pension is assessed under the assets test, a reduction in the level of income being drawn is unlikely to result in an increase in the rate of age pension.

However, if the account balance of the super pension has reduced as a result of a downturn in investment markets, it is worth informing Centrelink of the new balance as this may result in an increase in the rate of age pension (as a result of the level of assets that exceed the assets test threshold having reduced).

As a guide, the age pension for a couple (combined) reduces by $3.00 per fortnight for each $1,000 of assets that exceed the asset test threshold. The asset test threshold for a couple that own their own home is currently $394,500. Conversely, if the level of excess assets reduces, the age pension for a couple will increase by $3.00 per fortnight for each $1,000 reduction in the excess assets.

It is a fine balancing act and some caution needs to be exercised. A reduction in the level of assets may result in the age pension now being assessed under the income test, rather than the assets test. If this occurs, the following comments will be applicable.

3. For account-based pensions being assessed under the income test, the date the pension commenced to be paid is an important factor.

If the account-based commenced after 31 December 2014, and/or if the age pension commenced to be paid after that date, reducing the amount being paid from the account-based pension will not have any impact on the rate of age pension being paid.

4. However, if the account-based pension, and the age pension have both been continuously paid since before 1 January 2015, reducing the income drawdowns from the account-based pension may result in an increase to the rate of age pension paid by Centrelink.

In these cases, the amount of income counted under the income test is the actual income payable for the financial year, less an amount referred to as the deductible amount.

The deductible amount is calculated when the pension first commences and is based on the opening balance of the account-based pension, divided by the relevant number. The relevant number is the life expectancy of the pensioner, or reversionary pensioner (if nominated – in which case the longer of the two life expectancies is used). Once the deductible amount is established, it remains constant for the life of the account-based pension unless lump sums withdrawals are made, in which case the deductible amount is recalculated.

For example, if a 65-year old male commenced an account-based pension (with no reversionary pensioner being nomination) on 1 December 2014, and the opening account balance was $450,000, the annual deductible amount will be $24,272. ($450,000 ÷ 18.54). This amount will be deducted from the actual income being received from the super pension to determine the amount of income assessable under the income test. Therefore, if the level of income being received from the super pension is greater than the deductible amount, reducing the actual income being drawn will result in an increase in the rate of age pension.

Taking this example one step further, if the income being drawn from the account-based pension was (say) $40,000 per annum, only $15,728 ($40,000 – $24,272) would be counted under the income test.

If the super fund were requested to reduce the annual income payments from $40,000 to (say) $30,000, the amount assessed under the income test would reduce from $15,728 to $5,728. This would result in an increase in the amount of age pension being paid.

Having said that, if the level of income being drawn from an account-based pension is less than the deductible amount, a reduction in the level of income being received would not result in an increase in the rate of age pension being paid as the income received from their account-based pension is not affecting the level of age pension being paid. Likewise, there would be little value in reducing the income from the account-based pension to an amount less than the deductible amount, other than perhaps, to preserve money in the superannuation environment.

Therefore, where a person is receiving less than the full rate of age pension, and their super pension is an account-based pension, a reduction in the amount of income being drawn may result in an increase in the age pension entitlement provided the account-based pension commenced to be paid before 1 January 2015.

If this situation applies, and the super fund is being requested to reduce the level of income payments, it is important to ask the super fund to issue an amended “Details of income stream product form (SA 330)” and for this to be given to Centrelink to enable the reassessment of the age pension to be made.

In summary, and increase in the rate of age pension being paid by Centrelink may increase where:

1. A part age pension is being paid and is being assessed under the assets, and there has been a reduction in the account balance of the account-based pension, or:

2. A part-age pension is being paid under the income test and an account-based pension commenced to be paid before 1 January 2015, and the level of income being drawn from the account-based pension is reduced.

If you have questions about your superannuation or Centrelink and Veterans Affairs’ pensions, speak with a qualified financial planner.

 

Source: Peter Kelly | Centrepoint Alliance

Age Pension – what, when and how much?

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The big question – Does paying taxes while working give you the right to expect an age pension when you decide that you want to retire? – The short answer is no.

What is the age pension?
The age pension is a safety net to support people in retirement who do not have the necessary financial resources to either fully support or partially support themselves.

When can I access the age pension? At what age does a person qualify for an age pension?
For over 100 years, the qualifying age for the age pension was 65. In 2017 the qualifying age increased by six months and will continue to increase by six months every two years until 2024, when the qualifying age will reach 67.

The following table provides a more comprehensive overview.

How do I know if I am entitled to an age pension?
This is a complicated question which is very dependent on a person’s situation. Are you single or a member of a couple, do you own your home or are you renting, how much do you have in assets and what is your income?

The current full age pension is $933.40 per fortnight for a single person or $703.50 per fortnight for each member of a couple. This full age pension is adjusted twice a year, in March and September.

The age pension entitlement is calculated under both an assets test and income test.

Why is the age pension assessed under both tests? If a person’s entitlement is less under the assets test, then what may be payable under the income test, their entitlement is determined by the assets test as this test pays the lower age pension.

In addition to a person’s age and their assets and income, a person applying for the age pension also needs to meet a residency requirement, you must be an Australian resident, and in Australia on the day the claim is lodged. You also need to have been an Australian resident for a continuous period of 10 years or have resided in Australia for a number of periods that total 10 years with at least five of these years in one continuous period.

Australia does have international social security agreements with a number of countries and residence in these countries may count towards your qualifying Australian residence.

As you can see, qualifying for the age pension is not as simple as turning a certain age. It can be complicated, and it would be advisable to talk to an expert to ensure you do receive the right entitlement when you apply.

Source: Mark Teale | Centrepoint Alliance

Is it time to apply for the aged pension? Pt. 2

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We posted Part 1 of this topic on 25th October, which looked at the complexities and frustration of the application process.

The question has been asked regarding when should a person look at whether they would qualify for an age pension?

For many people, applying for the age pension is not something they think about until they are close to the qualifying age.

I believe that rather than waiting 13 weeks before you reach the necessary age, you should be looking at your situation five years before your qualifying age.

The qualifying age, depends on your date of birth and can vary between 65 and 67. As an example, a person born on 20 August 1956, would qualify at the age of 66 and a half. Those born after 1 January 1957, will need to wait until they turn 67.

So, for all those people who turn 62 after 1 January 2019, next year is the year you should review your circumstances and determine whether you may qualify for an age pension.

Why five years you may ask? For those people who see the age pension as a very important component of their retirement income, five years is an extremely important period.

As an example, consider the following situation;
The husband is turning 62 and his wife is 60. They own their own home, a couple of cars, have $85,000 in bank accounts and term deposits. Due to of a lifetime of work, they currently have a total of $650,000 in superannuation. Over the next five years through the strategy of salary sacrifice and investment growth, their super is expected to grow to around $800,000.

Their assets assessed for age pension purposes in five years could be close to $900,000, including their cars household contents and cash. Based on today’s upper asset threshold for a home-owner couple, which is $848,000, they would not qualify for an age pension. However, given the annual adjustment in the age pension and the thresholds at the age of 67 he may qualify for a small pension.

Of course, this all sounds very reasonable and based on their financial assets they should be able to achieve the comfortable lifestyle that they hope for when he retires at the age of 67.

The missing factors in this scenario are their children!

Their children are adults, they are married, have children of their own, but are struggling financially.

The couple have promised that when they retire, they will help them out by gifting them $100,000 each, three children a total of $300,000.

The downside to this plan is that in five years when they gift $300,000 to their children, and the husband applies for his age pension, Centrelink will maintain a gift of $290,000 for five years as an asset and deem income on this $290,000 when assessing his entitlement to an age pension.

This process will also affect her age pension entitlement when she applies two years later, on turning 67.

As this couple had not reviewed their situation in respect of their plans to gift money to their children, or the age pension legislation, they will find themselves in a less than comfortable position as their age pension entitlement is significantly less than what they had factored into their budget.

It is extremely difficult to ask for the money back once you have gifted the funds to children.

Believe it or not this situation occurs on a regular basis. The number of people who gift money to their children, for very good reasons, and then expect their age pension to increase to compensate for the funds that they have gifted, is a lot more common than we think.

Now, I am not saying that what this couple intends to do is wrong. What I am saying is that they need to review their position and make some decisions now.

If they do not have the funds to gift to their children at this moment and they still plan on giving $300,000 to the children in five years when they retire, they are at least aware of the consequences and are able to make plans.

Always remember to talk to someone and for the purposes of any age pension entitlement, do not leave it until just before reaching age pension age. If you do plan on gifting money to your children, make sure you do so five years before you turn age pension age, because, the deprivation rules don’t apply to the money or things you have given away more than five years previously.

 

Source: Mark Teale | Centrepoint Alliance