Legacy Pensions: Important Changes You Need to Know
For clients holding older, asset test-exempt superannuation pensions, known as legacy pensions, there are significant changes ahead. These pensions, once popular for their generous Centrelink treatment, have long been difficult to alter without risking unintended financial consequences. But recent government updates have created a window of opportunity, along with a clear warning: don’t move too soon without advice.
What’s Changing?
The government has confirmed that individuals with eligible legacy pensions, such as complying lifetime, life expectancy, or term-allocated pensions, will now have the opportunity to fully commute (i.e. exit or restructure) these pensions within a five-year window: 7 December 2024 to 6 December 2029.
Historically, many of these pensions received favourable Centrelink treatment, including 100% or partial asset test exemptions. Exiting them early would have triggered a reassessment of past Centrelink benefits, potentially leading to large Centrelink debts.
The Good News: Centrelink Amnesty Confirmed
On 28 March 2025, the government released the Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025, which waives Centrelink debts for those who choose to restructure their legacy pensions under the new rules.
However, this debt waiver isn’t expected to take effect until 5 September 2025, pending parliamentary disallowance periods, meaning any action taken before this date may still result in Centrelink debts.
Ursula’s Advice: Wait and Get the Right Support
Ursula Boorman, Managing Director at Direct Advisers, urges caution:
“Many of our clients are currently looking at their legacy pensions and wondering if now is the time to make a change. While the new rules open up welcome flexibility, moving too soon—before the amnesty officially takes effect—could result in significant and avoidable Centrelink debts. It’s essential to get advice before taking any action.”
Ursula also emphasises the importance of fully understanding how these changes interact with your current financial situation, retirement goals, and Centrelink entitlements.
Why Advice Matters Now
The potential benefits of restructuring a legacy pension, such as simplifying your finances or accessing more flexible income streams, must be weighed against your age pension eligibility and tax position. Each case is different, and timing is everything.
That’s why at Direct Advisers, we’re taking a tailored approach, helping each client carefully assess the best course of action before the 5 September 2025 start date.
Want to Know if This Applies to You?
If you or a family member holds a legacy pension, now is the time to start the conversation. Reach out to our team at Direct Advisers to discuss your options and create a plan that protects your entitlements and long-term financial well-being.
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