Pension Reassessment at the End of the Review Period

Last amended: 25 November 2008

Refreshing the annual rate

The updated earnings information provided at the end of the review period will allow the annual rate of income, and accordingly pension payability, to be reassessed. The refreshed rate of earnings is then held for the following review period, or until a further event (such as a pensioner's notification of an earnings change) is received.

Retrospective pension reassessments

The use of specific review — s may require that the pensioner's entitlements over the preceding review period be reassessed retrospectively, following confirmation of the pensioner's actual earnings over that period.

Favourable determinations

Where the updated earnings information shows that the rate of income held over the review period was too high (i.e. that the assumed rate of earnings was not in fact received), it is necessary to replace the rate of income held with the confirmed lower rate. This will result in a favourable determination, backdated to the commencement of the review period. The retrospective pension increase is necessary because of the VEA requirement that the annual rate of income be held (rather than an assumed annual rate), and because of the prior agreement with pensioners that appropriate adjustments will be made at the end of the review period. If retrospective increases were not determined, the Department's administrative preference for a periodic review arrangement will deny pensioners the higher rate of entitlement that would have resulted had they not agreed to periodic reviews.

Authority for retrospective adjustment

Retrospective adjustment can occur when a favourable determination is made under subsection 56G(3). This rule allows the decision maker to determine an earlier date of effect. A favourable determination may result from a department initiated review (DIR) where the Department obtains information from an employer relating to the pensioner's wages or salary. The DIR may occur at a particular point in time and/or because the end date of the agreed review period has arrived. If the change is the result of a notified change of circumstances to the Department by the pensioner, subsection 56G(2) must apply.     

Adverse determinations

Where the updated earnings information shows that the rate of income held over the review period was too low (i.e. the assumed rate of earnings has been exceeded), the lower pension entitlement applies from the day that the amending determination is made (or a later day, as specified in the determination). Retrospective pension reductions do not arise where a specific review initiated by the Department is in place, except for non-compliance with review conditions. The date of effect rule for adverse determinations arising out of a Departmental review, rather than through a pensioner's notification of changed circumstances, is provided for in section 56H VEA. This section does not allow a date of effect earlier than the date that the amending determination is made. However, this approach for adverse pension outcomes at the end of a specific review period will not apply if the pensioner breaches the notification obligations as agreed at the commencement of the review period

Recovery in cases of non compliance

It is necessary that assessors compare any modified notification obligations advised to the pensioner at the start of the review arrangement with the pensioner information received, to determine whether there has been a breach. For example, a pensioner will not have breached their notification obligations if prior agreement was reached that minimal or inconsequential changes to earnings were not required to be notified until the end of the review period. Where a breach of the notification obligations is found, the date of effect will be determined under either section 56A VEA (termination) or section 56B VEA (reduction).

Delays in processing a specific review

A new determination should be finalised as soon as possible following the end of the review period. A pension reassessment that is delayed beyond the end of the agreed specific review period will still be subject to the same date of effect rules as outlined for favourable and adverse determinations. This will allow the confirmed rate of annual income, if higher, to be held in the assessment from the date of the new determination. Where the confirmed rate of income is lower, the date of effect of the favourable determination is backdated to the commencement of the preceding review period. As the reduction in earnings over the review period entitles the pensioner to a higher rate of pension, delays in finalising favourable assessments should also be avoided wherever possible.

When to apply different dates of effect

The following table shows the date of effect to be used for the pension reassessment at the end of the review period.

Examples of different dates of effect

• At the start of the agreed review period, the pensioner's annual rate of income (based on previous earnings and any known changes) is determined to be $8,000. This assumed annual rate is then held for the duration of the review period. At the end of the review period, the confirmed rate of income over that period was found to have fallen to $6,000. A favourable pension determination is required, with the date of effect for the pension increase being the commencement of the original review period. This allows the correct rate of income to displace the incorrect assumed rate that was initially held.
• In the same situation, the pensioner's annual rate of income over the review period was found to have increased to $8,200 as a result of working a short period of unanticipated overtime. The pensioner was found not to have breached his notification obligations, as the agreed notification requirements for the purposes of the specific review was that minimal changes to earnings of this nature need not be notified until the end of the review period. The higher annual rate of $8,200 is then held from the date as specified in the amending adverse determination.
• In the same situation, the pensioner's income was found to have increased substantially to $12,000 as a result of an ongoing increase in the number of hours worked. The pensioner was found to have breached his notification obligations, as the agreement with the pensioner provided that changes to the type or pattern of employment resulting in significant earnings increases must still be notified within the usual 14 day notification period. The date of effect for the adverse pension determination will be the date of the earnings event.