Centrelink Told To Reassess Pensions

Sydney Morning Herald

Saturday October 25, 2008

Mark Davis Political Correspondent

THE Federal Government has instructed its welfare agency, Centrelink, to urgently reassess pension entitlements for pensioners whose investments have fallen in value or whose income has been affected by the financial market turmoil of recent weeks.

The Government is also considering extending special hardship payments to pensioners and self-funded retirees who have had their savings in market-linked investment products such as mortgage trusts and cash management trusts frozen in recent days.

Centrelink's general manager, Hank Jongen, urged people to contact Centrelink offices with information about the status of their investments to see whether the change in their financial situation affected their entitlement to government benefits.

Perpetual, Axa Asia Pacific, Australian Unity and Challenger Howard have frozen about $8.5 billion worth of investment funds this week after a flight of capital from managed investments to bank deposits.

These funds are continuing to make income payments to investors but will not redeem capital contributions for up to six months.

The chief executive of National Seniors Australia, Michael O'Neill, urged investors who had lost access to their savings to remain calm.

"Investors should understand that despite the freeze they will continue to receive their regular income streams and that their savings aren't under threat; they just can't access deposits in those funds at the moment."

The Minister for Housing, Tanya Plibersek, said Centrelink would help investors work out whether the assets test and the deemed income test used to work out entitlements to pensions were relevant to their situation. "With the change in financial circumstances that people are facing it may be that people who in the past have not been entitled to a pension ... may find their entitlements have changed."

Centrelink officials said there were three main areas where entitlements might be affected: Those whose investments had fallen in value might now pass the asset test on pension entitlements; Those who had invested in companies that had gone into receivership might be eligible to have those assets exempted from the assets test under special hardship provisions; Those suffering extreme financial hardship could be eligible for emergency payments.

Officials last night said the Government had asked Centrelink to revalue all pensioners' financial assets and to work out the pension they should receive.

The new valuation date would be October 13. Pension payments were expected to be adjusted from November 3.

They said the Government was also monitoring the deeming rate - the amount investors are deemed to earn from savings, for working out pension eligibility under the income test.

For market-linked investments such as mortgage and cash management trusts, the Minister for Families, Jenny Macklin, was examining how hardship provisions could be applied.

Retirees whose funds' assets had been frozen but were being paid income may be able to apply for assistance under the asset test hardship provisions. For those whose funds had also stopped distributing income the Government was looking at provisions in social security legislation which exempt investments from the deeming rules, officials said.

© 2008 Sydney Morning Herald

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