Age pension changes could encourage risky strategies

Changes to the age pension could encourage pensioners to embrace riskier investment strategies, according to new research from the University of Sydney.

Age pension changes could encourage risky strategies

Killian Plastow

Last Updated: 06 January 2017 Published: 06 January 2017

Commenting on the recent changes, University of Sydney Business School Professor Susan Thorp said new means testing arrangements "are likely to encourage wealthier pensioners to spend their savings more quickly than they otherwise would have and take on more financial risk".

"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."

Additionally, Ms Thorp said higher risk assets will "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," she said.

The changes to the age pension means testing arrangements came in to effect as of 1 January 2017.