20 September 2009 Social Security Changes Diane Hayes St Clair FirstTech

Disclaimer This presentation is given by a representative of Colonial First State Investments Limited AFS Licence 232468, ABN 98 002 348 352 (Colonial First State). Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of interests in FirstChoice Personal Super, FirstChoice Wholesale Personal Super, FirstChoice Pension, FirstChoice Wholesale Pension and FirstChoice Employer Super from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and interests in the Rollover & Superannuation Fund and the Personal Pension Plan from the Colonial First State Rollover & Superannuation Fund ABN 88 854 638 840 and interests in the Colonial First State Pooled Superannuation Trust ABN 51 982 884 624. The presenter does not receive specific payments or commissions for any advice given in this presentation. The presenter, other employees and directors of Colonial First State receive salaries, bonuses and other benefits from it. Colonial First State receives fees for investments in its products. For further detail please read our Financial Services Guide (FSG) available at colonialfirststate.com.au or by contacting our Investor Service Centre on 13 13 36. The information is taken from sources which are believed to be accurate but Colonial First State accepts no liability of any kind to any person who relies on the information contained in the presentation.   This presentation is for adviser training purposes only and must not be made available to any client. This presentation cannot be used or copied in whole or part without our express written consent. © Colonial First State Investments Limited 2009.

Agenda Increase in pension rate New indexation arrangement New pension supplement The new Work Bonus & Closure of Pension Bonus Scheme New taper rate changes & transitional arrangements Case study – Mary and Walter Other minor changes

Increase in government pension From 20 September 2009 Increase in maximum pension rate: *GST supplement only New Indexation arrangement on basic pension rate: New pensioner cost-of-living measure to be used Single pension rate will be set at 66.33% of the combined couple rate From 20 March 2010 the combined couple rate of pension will be benchmarked to 41.76% of the MTAWE (Male Total Average Weekly Earning) Pension Basic Rate Single Partnered (each) Pre Amt 20 Sep 09 Base $550.30 $615.80 $459.60 $464.20 Supplement $19.50* $56.10 $16.30* $42.30 Total $569.80 $671.90 $475.90 $506.50

New Pension Supplement The Pension Supplement - Fortnightly Payment (Singles) Minimum component $30.20 p.f. Source: Department of Families, Housing, Community Services & Indigenous Affair Couple (combined) pension supplement increase from $63.87 to $84.60

New Work Bonus From 20 September 2009 New Work Bonus: Half of the first $500 of fortnightly employment income will be disregarded from the income test for pensioners over age pension age. Equals to maximum increase in age pension entitlement of $3,250 p.a. per individual. May apply to both member of a couple if both eligible Pensioners who had previously received the pension bonus scheme is also eligible for the new Work Bonus Self employed people not eligible for Work Bonus

Closure of Pension Bonus Scheme Pension bonus replaced by ‘work bonus’ Pension bonus scheme closed to new entrants Continues for existing clients People qualifies for Age Pension before 20 Sep 2009 can still register Things to watch out for: Members who are not working and rely on their non-member partner’s employment to remain in the scheme will need to claim their bonus within 13 weeks of 20 Sep 2009

Closure of Pension Bonus Scheme PBS or work bonus? Depends on expected time in workforce, amount already spent in PBS, percentage of pension bonus expected Longer in PBS – pension bonus may be more favourable Reduced rate of pension bonus – work bonus may give more

Income Test Taper Change Income test taper rate to increase: from 40c to 50c in the dollar for a single pensioner From 20c to 25c in the dollar for each member of a couple Transitional Arrangement: Existing part pensioners affected by the change will: not have their pension reduced by the change the maximum base rate of pension will be different under the new rates to the transitional rate two separate sets of means test applies simultaneously until pension entitlement under the new rules gives a higher amount once the client is assessed under the new rates they will never be assessed under the transitional rate transitional rates does not take into account the new Work Bonus

Post rate vs Transtional rate - single

Case Study – Mary and Walter Facts: Couple, homeowner Walter was receiving the Age Pension on 19 Sep 2009. His wife Mary was not receiving any Centrelink payment at that the time because she hasn’t reached her Age Pension age. Walter has an account based pension valued at $300,000 where he is drawing down the minimum.

Case Study – Mary and Walter Facts: None of Walter’s pension income is assessed due to the Centrelink deductible amount. Mary earns $1,800 p.f.($50,400 p.a.) from employment which is their main source of income. Mary reaches Age Pension age in December 2009.

Case Study – Mary and Walter Cont. Walter’s Age Pension entitlement will be assessed under the income test Walter Age Pension entitlement Pre 20 Sep New rate Transitional rate Maximum base pension p.f $478.90 $506.50 $504.70 Reduction due to income test ($1,800 - $248) ÷ 2 x 0.4 = $310.40 ($1,800 - $250- $248) ÷ 2 x 0.5 = $325.50 ($1,800 - $248) ÷ 2 x 0.4 = $310.40 Age Pension entitlement per fortnight $168.50 $181 $194.30 When Mary attains age pension age, assuming everything remains the same, Mary’s entitlement will be $181 per fortnight

Case Study – Mary and Walter Cont What if Mary decides to retire and stop working? Total assessable income – nil Total assessable asset - $300,000 Age Pension entitlement couple each Mary – new rates Walter – transition Walter – new rates Maximum Age Pension $506.50 $504.70 Reduction under asset test ($300,000 – $252,500) ÷ 1000 x 1.5 ÷ 2 = $35.63 Entitlement $470.88 $469.07

Other minor changes Seniors Concession Allowance and Telephone Allowance will be combined into a new Seniors Supplement for CSHC and Veteran’s Affairs Gold Card holders. Removes additional income free amount for dependant child Introduced new Carer Supplement which is an annual, non-indexed, lump sum payment paid every July to people who are recipient of Carer Allowance, Carer Payment, DVA Carer Service Pension, DVA Partner Service Pension with CA

Increased age pension age From New age pension age Affects those born Current age 1 July 2017 65.5 1 July 1952 – 31 December 1953 55.5 – 57 1 July 2019 66 1 January 1954 – 30 June 1955 54 – 55.5 1 July 2021 66.5 1 July 1955 – 31 December 1956 52.5 – 54 1 July 2023 67 1 January 1957 and later 52.5 or younger Henry Tax Review report also recommends aligning the super preservation age with this higher age pension age

Additional resources The latest Centrelink thresholds can be found in the A Guide to Australian Government Payments which can be accessed through the FirstTech website (access through FirstNet Adviser) Fact sheets on the changes available from www.centrelink.gov.au Further questions: Email: firsttech@colonialfirststate.com.au Phone: 13 18 36 – Adviser Service Team