C09/1998 CHANGES TO LUMP SUM ADVANCE PAYMENT OF PENSIONS

Authorised by

R J HAY

BRANCH HEAD

INCOME SUPPORT

1. Purpose

The purpose of this Departmental Instruction is to provide policy, procedural and systems information on the implementation and administration of changes to lump sum advance payment of pensions.

2. Other DIs

This instruction should be read in conjunction with Departmental Instructions C40/96 and C17/97.

DVA will pay certain DSS age pensions from 26 March 1998. Departmental Instruction C32/97 (in particular, page 26), which deals with all aspects of these pensions, describes the conditions for the grant of lump sum advance payment of these pensions.

3. Effective date

This initiative is effective from 1 January 1998.

4. Background

Since 4 July 1996, income support pensioners were eligible for a lump sum advance payment of pension for certain purposes. The maximum advance was the lesser of $500 or 6% of the annual payment rate.

From 5 March 1997, applicants no longer had to declare the intended use of the advance, advances were limited to one per year and income support supplement recipients were entitled to the maximum $500 advance.

5. Legislative Changes

The Veterans' Affairs Legislation Amendment (Budget and Compensation Measures) Act 1997 repealed the old provisions and inserted a new Part IVA - Advance payments of pension and income support supplement into the Veterans' Entitlements Act 1986 (VEA). This makes a number of changes to the way the lump sum advance payment of pension works. These are:

• extension of eligibility to disability pension and war widow(er) pension only recipients, and
• simplification of the formula for calculating the maximum advance.

6. How will pensioners benefit?

The extension of eligibility to disability and war widow(er) pensioners means that recipients of most DVA pensions are now eligible to receive an advance.

The maximum advance available for pensioners receiving less than $38.50 per fortnight is now calculated by multiplying the fortnightly rate of pension by 13. The result is a considerable increase in the maximum advance available to such pensioners.

This initiative provides pensioners with more flexibility and choice in how they meet their needs. Simultaneously, the initiative simplifies administrative procedures for calculating the amount of advance payable.

7. Who can receive a lump sum advance payment of pension?

From 1 January 1998 all recipients of

• age service pension;
• invalidity service pension;
• partner service pension;
• income support supplement;
• war widow(ers) pension; and
• disability pensions

are entitled to a lump sum advance of their pension every 12 months. This applies to recipients of one type of pension as well as to any combination of these pensions.

8. Who cannot receive a lump sum advance?

The following DVA pensioners are not entitled to receive a lump sum advance of pension:

• beneficiaries under the Veterans' Children Education Scheme; and
• pensioners receiving a ‘saved' dependent's pension paid under the Veterans' Entitlements (Transitional Provisions and Consequential Amendment) Act (NO 28) 1986, eg the partner of a disability pensioner receiving the dependent 10% rate of $0.81 per fortnight.

9. What is the maximum advance payable?

The maximum advance payable will be:

• for pensioners whose total pension payment (including all allowances other than RAA) is $38.50 or more per fortnight - $500, or
• for pensioners whose pension payment (including all allowances other than RAA) is less than $38.50 per fortnight - their fortnightly payment amount multiplied by 13, or
• a lesser amount of advance sought.

All pensioners will continue to repay by fortnightly deductions over 13 paydays.

Example 1

The following are examples showing how to calculate the amount of the advance.

Roger receives a fortnightly service pension (SP) payment of $26.50. He applies for an advance of $300. A delegate of the Commission determines that he meets all of the eligibility criteria.

He is entitled to a maximum advance of $26.50 multiplied by 13 = $344.50. As the requested amount is less than the maximum, the delegate is able to approve an advance of $300.

Example 2

Sue receives fortnightly SP payment of $20 and a 10% DP payment of $24.16. She applies for the maximum advance of $500. A delegate of the Commission determines that she meets all of the eligibility criteria.

As her total fortnightly rate of pension is $44.16 (ie $20 + $24.16) which exceeds $38.50, the delegate is able to approve the advance requested.

Example 3

Bob receives a fortnightly rate of pension of $53.50 made up of SP ($25.30), Rent Assistance ($25.50) and Pharmaceutical Allowance ($2.70). He applies for an lump sum advance of $500. A delegate of the Commission determines that she meets all of the eligibility criteria.

As his total fortnightly rate of pension, including allowances, exceeds $38.50, the delegate is able to approve the maximum advance as requested.

10. Delegations

Instruments of Delegation have been approved based on your State Office requirements.

11. Forms

There are two forms used in the application for Lump Sum Advance:

• Form D556 - Application for Lump Sum Advance Payment of a Department of Veterans' Affairs Pension; and
• Form D557 - Lump Sum Advance Income/Expenses Calculator.

Both forms have been amended to take account of the new changes.

Both forms can be used by all pensioners paid through DVA (including DSS age pensioners from 26 March 1998).

12. Systems Impact

System changes have been made to enable processing under the new legislation from 1 January 1998.

13. Appropriations and Reports

Under the new rules, it will be possible to have a mixed advance, ie it is made up of both service pension and disability pension. Attachment A contains the rules for appropriation purposes.

The daily lump sum processing report is changed to allow an extra column, ‘Appro' in which the appropriation will be shown. Attachment B refers.

The fortnightly statistics reports have not been changed.

Limitation code 7196 should be used for SP, DP, ISS or SP/DP lump sum advance recoveries.

Limitation code 7180 should be used for DSS age lump sum advance recoveries from 26 March 1998.

14. Rounding of amounts

The VEA sets out the process for rounding the amount of:

• the advance (s79L refers); and
• the fortnightly repayment deduction (s79R refers).

For pensioners receiving a rate of pension less than $38.50 per fortnight, the combination of these provisions could result either in fortnightly repayments exceeding the fortnightly pension payment or the final repayment deduction leaving a payment of a few cents due to the pensioner. Indexation also adds similar problems.

In these cases, policy approval has been obtained to ignore the rounding rules. Legislative amendment will be sought.

15. Advices

Changes have been made to the relevant letters in the standard letters system. The revised standard letters can also be used for advances of DSS age pensions paid through DVA after 26 March 1998. Departmental Instruction C32/97, page 26 refers.

16. DSS pensioners

After 26 March 1998 age pensioners may qualify for a lump sum advance under both the VEA (as disability pensioners) and the Social Security Act 1991 (SSA) (as age pensioners). On application for an advance, the legislation which provides them with the most beneficial result should be applied.

A pensioner who receives DP from DVA as well as a pension or benefit from DSS and who received an advance by either department within the previous twelve months, is not eligible for an advance payment of DVA pension until the 12 month period is up.

Letter variables (continued)

However, the SSA does not preclude the payment of an advance to a client who received a DVA advance of pension in the previous twelve months.

In the event that an DSS age pensioner applies for a second advance within 12 months of receiving an advance of DP, delegates should be sure that they are satisfied of the pensioner's ability to manage on reduced income as required by the legislation, section 79B refers.

DSS do not intend amending the SSA to correct this anomaly.

NOTE: The transfer of DSS pensioners does not take place until 26 March 1998. DI C32/97 sets out the conditions for payment of a Lump Sum Advance in these cases. An amending DI will be issued at the time of transfer to update these provisions.

17. Contact

For further information, please contact Peter Read, Business Administration Unit on (02) 6289 6426 or email Read,Peter.