What will the flow on affects be for seniors entitlement changes?
28 October 2016
While all retirees are different, most have similar priorities. They want a regular, reliable income stream that will fund an enjoyable lifestyle, protection against running out of money if they live longer – and the ability to leave an inheritance to their loved ones if they die earlier.
This seemingly simple objective is set to become that much harder for many with changes to the asset test for the age pension due to be implemented on 1 January 2017.
Announced in the 2015/16 Federal Budget, the changes will impact approximately 416,000 age pensioners. Some will be better off, with 170,000 currently receiving a part age pension expected to see their payment to increase slightly. However, these changes will also see 91,000 lose their age pension entitlement, and about 235,000 will see their part age pensions reduce.
Our previous blog set out the new asset thresholds in detail. These can be seen here.
This hit to their regular income will, no doubt, come as a shock for many retirees and their solution may well be to spend less leading to a diminished lifestyle as many cut back in order to allay their fears about running out of money before they die.
How can a reverse mortgage help?
It is here that a reverse mortgage with a regular income option can be of real benefit to retirees. A Heartland Regular Advance, be it monthly, quarterly or annually, will help borrowers manage the financial consequences of an uncertain length of life by continuing to pay the retiree for up to 10 years providing them with a secure layer of income over that period of time.
For many, this will bring the peace of mind of having in place a guaranteed stream of income to help cover the necessities in retirement.
Some retirees are servicing home loan and other debt well into their non-working lives and any reduction in regular income will impact this cohort greatly. Relief from this commitment may be achieved by simply placing the loan into reverse, freeing up the cash previously applied to repayments to sustain the lifestyle that they want after a lifetime of working and saving.
Aged Care changes
In addition to the potential pension loss, people who move into residential care from 1 January 2017 may also have pension entitlements reduced under the income test due to changes in the assessment of rental income on their former home.
For these people, rental income will be assessed not only in their aged care fee assessments but also in their age pension income test.
The costs of entering and living in residential aged care are not inconsiderable and using some of the equity in the former family home, via a Heartland Seniors Finance Aged Care Loan, may offer some much needed breathing space for the families of those needing care.
Reverse mortgages are a specialist form of mortgage requiring an understanding of the unique financial consequences to customers.
Heartland has a fully trained, specialist team who are passionate about reverse mortgages and how it can help seniors live a better retirement.
If you have any questions or would like to apply for a Heartland Seniors Finance Reverse Mortgage, please do not hesitate to contact our friendly team to discuss how we could help you.
Information provided is accurate as at 28 October 2016 and may change from time to time