Means test changes boost funeral bonds: Lifeplan

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With the Federal Government closing down or reducing thresholds on many benefits, the social security means test threshold for funeral bonds has bucked this trend, increasing to $12,000 from July 1.

Matt Walsh, head of Lifeplan Funds Management, says one of the key benefits of funeral bonds is that they are exempt, up to the $12,000 threshold, from testing under the Assets and Income Test.

“For an individual subject to the Assets Test, a funeral bond could increase their pension by up to $18 per fortnight, which is equivalent to a 3.9% return on the $12,000 investment, in addition to what investment return is achieved,” says Mr Walsh.

For someone assessed under the Income Test, the benefit may be up to $8 per fortnight.

Mr Walsh pointed to the example of Betty, a woman in her early 70s, who owns her own home.

Her current position is:

  Asset test value Income test amount – p.a.
Account based pension^ $250,000 Nil
Term deposit/cash $100,000 $2,801
TOTAL $350,000 $2,801
Thresholds for maximum pension* $202,000 $4,160

 ^ Assumes deductible amount equals or exceeds payments received.
*  Amounts over these thresholds reduce pension entitlement. Source: Department of Human Services ‘A Guide to Australian Government Payments 1 July 2014’.

Under the Income Test, Betty would be entitled to a fortnightly Centrelink Age Pension of $766 (maximum basic rate), however, the Asset Test results in a reduced rate of $544 per fortnight.

Moving $12,000 of her term deposit/cash assets into a funeral bond would increase her fortnightly pension to $562, an increase of $18 per fortnight.

“As the $12,000 limit exemption is based on the purchase value of the funeral bond, and not the account balance, it also provides the opportunity for retirees to top up their investment.

“For example, with a bond worth $12,200 now but purchased with $11,500 a couple of years ago, the opportunity exists to top up this amount by $500,” Mr Walsh explains.

Mr Walsh says research shows that cost is a key influencer when planning a funeral, rating more highly than religion and family traditions.

“Research undertaken by McCrindle shows that for 66 percent of Australians, cost is an extremely or significantly influential consideration. It was considered more important than religion, at 31 percent, and family traditions, at 27 per cent.*

With a number of different options available for those wanting to save for future funeral costs, Mr Walsh says the favourable social security treatment of funeral bonds, and the increase in the exempt threshold, is a compelling reason to take a closer look at funeral bonds.

“With so much negative media and poor views from consumer bodies about funeral insurance, funeral bonds remain the one consumer friendly way to provide for your final expense,” Mr Walsh concludes.


* McCrindle, Deaths and Funerals in Australia: a statistical snapshot, 2014

Lifeplan Funds Management is a market leader in investment and funeral bonds, and a leading provider of education investment funds. It is a specialist business of Australian Unity Investments.


For more information please contact:

Matt Walsh – Phone: 08 8236 4706

7 July 2014