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C47/1997 LESS THAN $1.00 VARIATIONS IN INCOME SUPPORT PENSIONS

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DATE OF ISSUE:  24 SEPTEMBER 1997

LESS THAN $1.00 VARIATIONS IN INCOME SUPPORT PENSIONS

Purpose of Instruction

This departmental Instruction (DI) provides policy guidelines relating to the non processing of changed circumstances where the result would be a less than $1.00 variation in pension, commencing only with changes to income from financial institution assets subject to deeming.

R J HAY

BRANCH HEAD

INCOME SUPPORT

Background

Introduction

On 4 February 1997, the Repatriation Commission endorsed a strategy for introducing the new Budget legislative provision of not processing some income support pension variations of less than $1.00.  Commission agreed to a gradual implementation of the initiative, commencing with changes to assets in financial institutions subject to deeming, unless this would result in the pensioner being denied an additional benefit.

Financial institutions

Section 5Q(1) of the VEA defines a financial institution as a bank, building society, credit union or other institution that receives money on deposit.

Date of effect

The initiative will take effect from 3 April 1997.

About $1.00 Minimum Variation

Aim

This initiative extends the principle of simplification of the rules relating to the assessment of financial assets and complements other measures announced in the 1995/96 Budget.

It will further reduce the number of PIRs and reduce the processing work involved in those PIRs of little or no consequence.

Links with other initiatives
  • $1.00 minimum variation is linked to other business improvement projects under the Income Support Breakthrough Project (ISBP), including a revised obligations strategy, improvements to advice letters and development of an Information Kit for pensioners.
  •  
  • It is also linked to other initiatives aimed at simplifying and rationalising processing, such as the $2000/$4000 extended deeming and the data collection review exercise.

Legislation

The legislative provisions applying to this initiative, Section 56DA, allow for Commission to declare to which classes of changed circumstances the $1.00 minimum variation will and will not apply.

Gazettal Notice

The legislative provisions applying to this initiative (Section 56DA) require a Repatriation Commission declaration outlining the changes of circumstances to which the provision does not apply be included in the Government Gazette.  This notice was gazetted on 26 March 1997.

Classes of changed circumstances

Initially the initiative will apply only to changes to assets in financial institutions subject to deeming, ie bank accounts, credit union accounts, building society accounts or other institutions that receive money on deposit.

Pensioners to which the initiative does not apply

The $1.00 minimum variation does not apply to the group of disability pensioners transferring from DSS who will have their age pension paid by DVA from 1 July 1997.  This is because those pensioners are covered by the DSS Act and the initiative applies only to the VEA.

The initiative should not be applied if it would result in the pensioner being denied an additional benefit, ie fringe benefits, local concessions or treatment benefits, that depend upon the pensioner receiving a prescribed rate.

Right of review

A pensioner has no right of review against the application of this provision as no determination has been made.

Current procedures

Current procedure for processing a variation in circumstances

When advice is received of a variation in circumstances, the case is investigated, the client data base updated via PIPS/PC and the pension rate automatically reassessed.  An advice letter outlining details of the new assessment is then generated and sent to the pensioner.

Change in procedures

Change

From 3 April 1997, there will be no requirement to process changes to assets in financial institutions subject to deeming where the result would be a less than $1.00 variation in pension.

Response to pensioner when the case is not processed

Advice to pensioner

When a case is not processed under the $1.00 minimum variation rules, the pensioner is to be advised accordingly.  (This may prevent a further PIR/phone call/visit).

Standard Letter

Four Standard Letters have been created, single maximum and less than maximum rate and married maximum and less than maximum rate pensioners, to cover cases to which the initiative applies.  The letters contain open variables for the minimum financial asset variation that must occur for the pension rate to change.  The text of the letters is at Attachment A.

Procedure for applying the $1 variation provision

Procedure

The table below outlines the steps to follow each time advice of a change in circumstances to income from financial institution assets subject to deeming is received.

Step

Action

1

Check whether the PIR is solely about a change to a financial institution account.

2

If no, process as normal.

3

If yes, check if the pension is income tested by opening the IQ.IA and/or the trial screen.

Note:   The trial screen or the SP7 ready reckoner will assist.

4

If no, process as normal.

5

If yes, check whether a reduced rate is payable.

6

If maximum rate is payable, refer to the income test ready reckoner and check if advised changes would reduce pension rate by $1.00 or more.

7

If no, prepare appropriate Standard Letter and send to pensioner.

8

If yes, process PIR as normal.

9

If reduced rate is payable, check which deeming rate applies.

Note:   Use the total financial assets on IQ,IA screen as a guide.

10

Refer to applicable deeming amount on income test ready reckoner and check if advised changes would result in less than $1.00 variation.

11

If no, process as normal.

12

If yes, prepare appropriate Standard Letter and send to pensioner.

Miscellaneous information

Integrated advice letters

The integrated advice letters will be updated to reflect this initiative.

Ready Reckoner

An income test ready reckoner to assist in determining the pension rate variation and appropriate variables for inclusion in the Standard Letters is at Attachment B.

Questions and Answers

A list of common questions and answers relating to the application of this initiative is at Attachment C.

Procedure flowchart

A flowchart outlining the steps in processing an advice of changes to income from financial institution assets subject to deeming is at Attachment D.

Automatic runs

Variations of less than $1 will continue to be processed in the automatic runs for the time being.

Future extension of provisions of Section 56DA

The provisions of Section 56DA will be gradually extended to other classes of income and assets, subject to procedural, workflow and system changes that would be necessary to successfully implement the initiative.  This will be done in conjunction with work that is being done on the data collection review exercise.  State Offices will be contacted for further comments.

Screen deficiencies

There are some deficiencies in the IQ.IA screen which may make processing of a small number of these cases more difficult.  This has been addressed and the problems are being fixed with changes for the “bring em backs” and should be implemented by the end of June.

Registering less than $1 variation cases on CMS

There is no National instruction on registering the cases where $1 minimum variation applies.  This initiative is aimed at reducing work and registering these cases is considered to be counter-productive.  However, in view of comments received from the States, this issue will be further considered.

Cumulative effect issue

This is not expected to be a significant issue, but will also be further considered.

ATTACHMENT A

STANDARD LETTERS PARAGRAPHS FOR MARRIED AND SINGLE PENSIONERS WHEN THE CASE IS NOT PROCESSED

MARRIED, LESS THAN MAX RATE

Thank you for your {letter, telephone call, visit} dated {date of advice } concerning changes to financial assets.

The Department now no longer varies pensions by amounts of less than $1.00.  As the changes you advised would result in a payment change of less than $1.00 your pension will continue to be paid at the existing rate.

It is now no longer necessary for you to provide information about changes in your bank accounts unless they vary by{$2,600 for deemed assets below $50,000 or $1,700 for deemed assets above $50,000}.

You are still obliged to notify the Department of any other changes in your circumstances.

MARRIED, MAX RATE

Thank you for your {letter, telephone call, visit} dated {date of advice } concerning changes to financial assets.

The Department now no longer varies pensions by amounts of less than $1.00.  As the changes you advised would result in a payment change of less than $1.00 your pension will continue to be paid at the existing rate.

It is now no longer necessary for you to provide information about changes in your bank accounts unless they rise above {$176?income from non-financial assets?0.06x26=approx asset figure.  Caution 0.06 is current top deeming rate}.

You are still obliged to notify the Department of any other changes in your circumstances.

SINGLE, LESS THAN MAX RATE

Thank you for your {letter, telephone call, visit} dated {date of advice} concerning changes to your bank related financial circumstances.

The Department now no longer varies pensions by amounts of less than $1.00.  As the changes you advised would result in a payment change of less than $1.00 your pension will continue to be paid at the existing rate.

It is now no longer necessary for you to provide information about changes in your bank accounts unless they vary by {$1,300 with deemed assets below $30,000 or $850 for deemed assets above $30,000}.

You are still obliged to notify the Department of any other changes in your circumstances.

SINGLE, MAX RATE

Thank you for your {letter, telephone call, visit} dated {date of advice} concerning changes to your bank related financial circumstances.

The Department now no longer varies pensions by amounts of less than $1.00.  As the changes you advised would result in a payment change of less than $1.00 your pension will continue to be paid at the existing rate.

It is now no longer necessary for you to provide information about changes in your bank accounts unless they rise above {$100?income from non-financial assets ?0.06x26=approximate asset figure.  Caution - 0.06 is current top deeming rate}.

You are still obliged to notify the Department of any other changes in your circumstances.

ATTACHMENT B

LESS THAN $1 MINIMUM VARIATION READY RECKONER -INCOME TEST

Note:   Applicable only when the Deeming rates are 4% and 6%

Amount

Assessed Income

Pension Variation

(rounded)

Comments

4%

6%

4%

6%

$850

$1.31

$1.96

70c

$1.00*

*Minimum pension variation for single or ISS pensioner

900

1.38

2.08

70c

1.00

1000

1.54

2.31

77c

1.20

1100

1.69

2.54

80c

1.30

1200

1.85

2.77

90c

1.40

1300

2.00

3.00

1.00*

1.50

*Minimum pension variation for single or ISS pensioner

1400

2.15

3.23

1.10

1.60

1500

2.31

3.46

1.20

1.70

1600

2.46

3.69

1.20

1.80

1700

2.62

3.92

1.30

2.00*

*Minimum combined pension variation for a married couple

2000

3.08

4.62

1.50

2.30

2250

3.46

5.19

1.70

2.60

2500

3.85

5.77

1.90

2.90

2600

4.00

6.00

*2.00

3.00

*Minimum combined pension variation for a married couple

2750

4.23

6.35

2.10

3.20

3000

4.62

6.92

2.30

3.50

3500

5.38

8.08

2.70

4.00

4000

6.15

9.23

3.10

4.60

4500

6.92

10.38

3.50

5.20

5000

7.69

11.54

3.80

5.80

6000

9.23

13.85

4.60

6.90

7000

10.77

16.15

5.40

8.10

8000

12.31

18.46

6.20

9.20

9000

13.85

20.77

6.90

10.38

10000

15.38

23.07

7.69

11.50

Note:   Rounding has been applied

ATTACHMENT C

QUESTIONS AND ANSWERS FOR APPLICATION OF THE $1 MINIMUM VARIATION PROVISION

Question:Should the policy be applied to pensioners who have money deposited in financial institutions and other financial assets such as shares and managed investments?

Answer:Yes, but at this stage the initiative should only be applied to the financial institutions accounts i.e bank, building society, credit unit or other institutions that receive money on deposit.

Question:What happens if the pensioner also has managed investments or shares?

Answer:The decision to process should be made on the basis of whether the change(s) to the financial institutions would result in a $1 per fortnight or more variation.

Question:What happens if there are so many changes and the outcome is not immediately obvious?

Answer:By comparing the new financial institutions total with the previous total, the outcome should become clear.

Question:Does the initiative apply to both income and assets tested cases?

Answer:No, it applies only to income tested cases.

Question:Is the minimum variation $1 each for married pensioners?

Answer:Yes, only the specified changed circumstances which result in a $1 per fortnight or more pension change for single pensioners, and $2 per fortnight or more combined pension change for partners, should be processed.

Question:What happens when pensioners transfer assets from a financial institution to another type of financial asset and vice versa?

Answer:The PIR involves changes to other financial circumstances besides financial institutions, and at this stage it should be processed regardless of the outcome.  The issue will be looked at as part of the data collection project.

Question:Does the pensioner have a right of review?

Answer:There is no right of review against the application of the provision, as under the provisions of section 56DA no determination has been made.

Question:What if the pensioner complains that he/she is being disadvantaged by the new legislation, because:

a) Their pension rate is not being varied because the changes to their financial institution accounts have resulted in less than $1 per fortnight pension variation; or

b) Changes to other income and assets which result in a less than $1 per fortnight pension variation are still being processed.

Answer:The following advice should be given:

a) The Department is keen to minimise the amount of unnecessary

intrusion upon pensioners and to improve pension processing efficiency.  In line with this approach new legislation has been passed under which only pension changes which result in an upwards or downwards change of more than $1 per fortnight will be processed in future.  This means that pensioners will no longer be required to notify the Department of small changes to their financial circumstances.

b) As above but with an additional sentence - Initially the new policy will only be applied to financial institutions but it is intended to gradually extend it to cover all changes to financial circumstances over the next year.

Question:Are there any exceptions to the new rules?

Answer:Yes.  The initiative should not be applied if it would result in the pensioner being denied an additional benefit i.e. fringe benefits, local concessions or treatment benefits that depend upon the pensioner receiving a prescribed rate.

Please note that the initiative does not apply to the group of disability pensioners transferring from DSS who will have their pension paid by DVA from 1 July 1997.  This is because these pensioners are covered by the DSS Act and the initiative only applies to the VEA.