Don Randall (Canning, Liberal Party, Shadow Parliamentary Secretary for Local Government) Share this | Link to this | Hansard source

I rise to bring to the attention of the House an issue with Centrelink affecting two of my constituents, Mr Don and Mrs Valerie Clements. Mrs Clements took out a lifetime income stream before 2004 when a complying income stream was allowed to be 100 per cent exempt from the Centrelink assets test. She has been able to claim the age pension for a number of years as a result. Since that time, changes have been made to social security regulation that means that such income streams are no longer exempt. But those who, like my constituents, took them out before the rules were changed have been allowed to retain their exemption with conditions.

One of the conditions is that the assets backing the income stream satisfy a 'high probability test' as certified by an actuary. Essentially, the actuary must be confident that the assets have a high probability of meeting all future income stream payments. If this test is not satisfied, Centrelink requires the commuted value of a lifetime income stream to be rolled over into a new complying annuity or into an alternative market linked product known as a term allocated pension within 13 weeks. If such action is not taken, the income stream loses its assets-test-exempt status from the time it was first taken out. This includes the many years that an age pension has been claimed with the mutual belief that the recipient satisfies the assets test. Quite simply, someone in this situation could become retrospectively ineligible for a pension, creating a debt with Centrelink for payments they have received but are not entitled to. Centrelink will then generally seek to reclaim up to five years of past pension payments.

My constituent Mrs McClements learned late last year that her income stream did not meet the high probability requirements. A complex assessment officer from Centrelink wrote to the McClements very soon after receiving the actuary's report to advise that they would have to commute the income stream within 13 weeks of their providing the report to Centrelink on 21 December 2012. The deadline was set for 27 February 2013. When the McClements approached their financial planner about rolling over their funds, they learned that many of the assets backing this pension were still frozen or had restrictions placed on their redemption after losses and instability during the global financial crisis. Though they explored a number of options, it became clear that they would not be able to meet the requirements of commuting the income stream within 13 weeks as a result of the issues with these frozen assets. Wealthcorp financial planners advised that they would likely be able to make the required transfer in around six months from the date the report was provided but certainly not within three.

The McClements contacted Centrelink to discuss their options but there did not appear to be anything their representatives could suggest as an alternative course of action. They requested but were not granted an extension of the grace period and were merely reminded of their obligation to complete the rollover within 13 weeks. As well as providing a letter from their financial planner, the McClements also telephoned Centrelink on a number of occasions in the hopes of getting advice on what they could do to avoid losing this assets-test exemption but found it hard to get in touch with anyone in a position to help, with calls often going unreturned.

Unsure what they could do, Mr and Mrs McClements came to me about a week before this deadline on 18 February. I then contacted Centrelink and the matter was referred to a complex-assessment officer but, despite following up on this matter with one of their offices in my electorate, I am yet to receive any kind of response. I understand that this is an unusual and perhaps complicated case, but more than a month has passed without any response from Centrelink to my inquiries beyond an acknowledgement of receiving my correspondence. Centrelink have also consistently failed to respond to valid queries from my constituents about how to proceed and about what debt might be raised against them. Mrs McClements received a letter from Centrelink when the 27 February deadline passed and she had not provided any proof of commuting the income stream. She was told she would be advised of the amount she would be expected to pay back but has not heard any further, despite a number of weeks passing.

I am left to conclude that this matter has been put into the too-hard basket and that Mr and Mrs McClements might be expected to pay a very high price for a situation possibly not accounted for within social security legislation. I will continue to work to resolve this issue for my constituents, who have done all they can to comply with the relevant regulations and are struggling against these unfortunate circumstances. I intend to refer this contribution of mine in this parliament to Kathryn Campbell at the Department of Human Services so that the plight of Mr and Mrs McClements can be addressed at the very highest level of Centrelink.