Pension concession card fears
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Pension concession card fears

In your January 20 column, your last sentence reads: “Just don’t stay overseas for more than six weeks, or you would lose the card!”. The card in question being the Pension Concession Card. My card is sometimes referred to as the “reinstated concession card,” as it was issued after we lost the part pension in the January 2017 changes. The thought of losing the card is alarming. Today, I contacted the Department of Veterans' Affairs, the issuer, who after checking, assures me they have no knowledge of any such rule. Is he correct? M.M.

You’ve exposed a fairly obscure difference between Pensioner Concession Cards (or PCCs) issued by the Department of Human Services, via Centrelink, and those from the Department of Veterans Affairs.

PCCs issued by Centrelink will be cancelled if you leave Australia to live in another country, or for more than six weeks.

Since the Department of Human Services and the Department of Immigration exchange data, the PCC can be restored automatically when a person returns to Australia.

However, if the card was stopped while you were away and didn’t restore automatically on your return, then you need to contact Centrelink.

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The rule applies both to standard PCCs and those issued as “reinstated” cards following the January 2017 changes to the assets test.

However, the DVA confirms your report that a PCC issued by the DVA, whether reinstated post January 2017, or otherwise, will not be cancelled if the holder goes overseas for more than six weeks.

The DVA points out that PCC holders are not eligible for concessions overseas, but the card is available for use on return to Australia.

I suspect the difference between the PCCs was not widely known throughout both departments.

As an aside, when you travel out of Australia, pensioners can normally continue to receive an age pension for the whole time, even if you live in another country for a while, subject to the terms of any social security agreement with that country.

However, after six weeks, or immediately for permanent departures, the Pension Supplement reduces to the basic amount of $23.60 a fortnight for singles ($38.80 for couples) and the Energy Supplement ($14.10 and $21.20 a fortnight, respectively) ceases.

The 2016-17 Budget announced that the Pension Supplement would also cease after six weeks away, but that Bill has been stuck in Parliament since June, 2017.

Travellers who qualify for an age pension should note that the Commonwealth Seniors Health Card (CSHC) is treated differently to the Pensioner Concession Card.

If you go overseas temporarily, your CSHC will remain current for up to 19 weeks, after which it will be cancelled and you must re-apply once you return. (It used to be six weeks until 2015.)

If you leave Australia to live in another country, your CSHC will be cancelled on departure.
That is an important factor to be remembered by anyone holding a CSHC issued before January 1, 2015, since those older cards are “grandfathered,” in that the income test applied continues to ignore untaxed income from allocated pensions (or “account-based pensions” ). The benefit will remain as long as you continue to hold a CSHC and retain the same account-based pension.

Newer CSHCs see the balance of the pension fund subject to “deeming,” thus resulting in a higher income and a greater chance of not getting the card.

Is $7500 unreasonable? This is what our new adviser (our previous one retired) charged for re-organising our “affairs” i.e. he transferred some shares in my name to my husband, opened a Macquarie account and directed our MLC Navigator payments into it, as well as some dividend payments. Our $200,000 savings was invested with a company that we had never heard of. I can understand why we have lost money and paid a large (for us) fee, but think a further $7500 is exorbitant. A tentative discussion has not been positive. We are 83 and 82 years old and so far have managed quite well as self-funded retirees (we own another property). What is your opinion re fees? From what I can ascertain, this person has qualifications but not what is recommended by the Financial Planning Association of Australia.  M.M.

Unfortunately, advice fees have risen as the government has come down hard on the industry in the face of disturbing allegations of poor behaviour.

Advisers have to pay three different government regulators — a new, mind-bogglingly large “industry funding levy” to the Australian Securities & Investments Commission, plus additional levies to the Tax Practitioners Board and the Financial Ombudsman, while the new Financial Adviser Standards and Ethics Authority has upped the level of education required to a minimum of 40 hours a year of continuing professional education. Many of these hours are provided at high cost.

Solicitors keeping up to date with the law require 10 hours a year.

Compulsory professional indemnity insurance is sky high, deservedly so given the poor reputation of the industry, while income from commissions paid by fund managers have been banned since 2013, and pre-2013 “grandfathered" commissions are about to disappear.

In summary, costs are way up and income is way down.

So, as you have found, advisory firms have attempted to stay in business by increasing their upfront fee for service — hence your $7500 fee — and also generating ongoing annual income, primarily through “separately managed accounts,” where I suspect your money has been placed.

You should check what ongoing fees you pay.

These types of accounts are a modern-day version of the old wrap accounts, usually controlled by the adviser and from which the pre-agreed fees are paid.

Their popularity has recently increased among advisers, given that the client largely cedes control.

I note that one of the recommendations of the Hayne Royal Commission is that advisers should be licensed individually — as are lawyers and doctors— which might, just might, reduce the current situation where advisers in a firm can be required to produce income to meet a target.

On the other hand, legal firms and medical clinics arguably see their registered individuals as fee producers required to contribute to the firm.

My own feeling is that advisory fees — whether justified or not — are already too high and may get even higher.

Lower-income earners, who may not have large investments but need advice on their choices for, say, retirement and aged care, find it unavailable at a reasonable price.

A survey some months ago found that the average advisor’s upfront fee was about $3300. The survey also found that members of the public thought that $300 would be a reasonable fee for advice.

In your case, you would have to question, as you are already doing, whether you are getting value for money and whether you would do as well — and sleep just as well — if you were not receiving such a service.

Given that you are experienced investors, I suspect you would but that must be a personal decision of yours.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00. All letters answered.

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