Question: What do you think the chances are of Scott Morrison’s support for a tightening of pension entitlements getting up? My understanding is that both ACOSS and Morrison think a couple with $800,000 in assets outside the home is “wealthy,” whereas such a couple may well be earning less than the pension. How does such an approach encourage people to sacrifice now in order to build up their superannuation for the future?
Answer (By Paul Rickard): I think there is a good chance that there will be changes. It seems to have broad political support – and can probably be done without antagonizing too many voters. It is also such a complex area – very hard for the public (and media) to follow the debate and implications.
3 areas are being considered:
a) the exempt amount before the asset test starts (for both homeowners and non- homeowners);
b) the taper rate – currently $1.50 for each $1,000 – however was $3.00 back in 2007;
c) as a corollary to (b), the threshold at which any entitlement to a part pension ceases.
My guess is that (b) is a starter – not sure whether they want to cut that hard into the exempt amount and jeopardise some pensioners losing their entitlement to a full pension.
Also, it is very unclear as to a possible start date (post next election?) and/or grandfathering for existing pensioners. (See Tony Negline’s article today for what SMSF trustees can do about talked about changes.)
Question 2: I have Euro funds in Europe. I want to bring the funds back to Australia in the next few months. Do you think the Euro rate will improve against the A$, or should I bring the funds in now?
Answer 2 (By Paul Rickard): In the medium term, I think the Australian dollar will weaken against most currencies. It is holding up very well against the Euro – however, this has been due to Euro weakness arising from the QE programme.
I would expect a re-test of the 0.70 Euro level (1 A$ buys 0.70 Euro). In the short term, it is hard to forecast, but err on the side of expecting Aussie dollar weakness.
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