Age Pension changes might encourage 'risky investments' – University of Sydney expert

AN EXPERT in life cycle finance says changes to the Age Pension may lead some pensioners towards risky investments.

Professor Susan Thorp from the University of Sydney Business School has extensively assessed the changes to the Age Pension proposed in the 2015-16 Federal Budget that come into effect this year.

“Changes to the Age Pension Means Tests are likely to encourage wealthier pensioners to spend their savings more quickly than they otherwise would have and take on more financial risk,” Prof. Thorp said.

“Many pensioners, especially the less wealthy and more elderly, hold onto their financial assets into old age.

“However, historically, wealthier pensioners affected by the assets test spend their savings at significantly faster rates than full pensioners,” she said.

“This is partly because less wealth means a higher pension for this group. Recent changes encourage better-off retirees to use up their nest eggs faster, rather than preserve and pass their wealth on.

“Risky investments will also look a little more attractive to some pensioners. The new asset test means that the pension compensates for financial losses at a higher rate than previously.

“If assets fall by $1,000, the pension rises by $78 compared to $39 previously.”

www.sydney.edu.au

 

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