Income stream indexation review 110-02060030

An income stream is a regular series of payments, which may be made to a person (or their partner) over their life time or for a fixed term. Income stream payments may be subject to indexation, which is the percentage increase in the gross income each year. Types of income streams where payments may be indexed include:

• Lifetime income stream (LIS)
• Life Expectancy income stream (LIE)
• Term income stream (TIS)
• Lifetime pooled income stream - superannuation (LPS)
• Lifetime pooled income stream - non superannuation (LPO)
• Defined Benefit income stream
• Military invalidity pension

Note: until a system release is available, military invalidity pension income streams must be coded as defined benefit income streams.

The following non-defined benefit income stream products are obsolete. They can no longer be coded from 20 September 2004. These products were never converted to the new types. Customer records with these product types still exist on the system and may be indexed:

• Ordinary Money Annuity Life (ANL)
• Ordinary Money Annuity Term (ANN)
• Rollover Money Annuity Life (ARL)
• ETP Superannuation Pension Life (ARP)
• Rollover Money Annuity Term (ARS)
• ETP Superannuation Pension Term (ART)

Non-defined benefit income streams include:

• lifetime
• lifetime pooled
• life expectancy, and
• term income streams

The indexation may be a fixed rate such as 3% per annum or linked to the Consumer Price Index (CPI) or based on any other method.

• The indexation date is usually the anniversary of the purchase date
• The indexation method and date will be stated on the income stream schedule
• Indexation fields display when recording the income stream
• It is important for Service Officers to make sure that the indexation details are recorded if the income stream is indexed

If the indexation method is 'CPI', 'SAL' or 'OTH', the system will automatically issue a letter to the customer or their partner requesting the new gross income amount and frequency of payment. The product details are listed on the letter:

• product type
• product provider name, and
• product reference number

This will be based on product details available on the customer's or their partner's Centrelink record.

It is important that Service Officers make sure the indexation date is also advanced by one year when the new gross income is updated:

• care should be taken when advancing the date as it is based on the anniversary of the start date
• it is not one year from the event date or the date the customer advises the new gross income amount or the date the income is updated

Note: if the indexation method is 'FIX', the system will automatically increase the gross income amount by the indexation percentage on the indexation date. Staff must not update the gross income even if the customer contacts to advise the new income amount. Service Officers should tell the customer that their income stream will be updated automatically by the Centrelink system.

A letter is sent to the customer and/or their partner on the indexation date, if a customers has:

• an asset-test exempt lifetime or life expectancy income stream paid from a Self Managed Superannuation Fund (SMSF), or
• Small Australian Prudential Regulation Authority (APRA) Superannuation Funds (SAF), and
• the payments are subject to fixed indexation (Indexation Method is 'FIX')

This letter tells the customer about:

• the indexation rate used
• the adjusted gross annual income from the product, and
• informing Services Australia if the indexation rate has changed

The indexation fields will not display for defined benefit or military invalidity pension income streams. The CPI indexation date for each provider will be held in the system.

In the case of defined benefit or military superannuation fund providers that:

• participate in the bulk electronic update, income is auto updated by using data supplied by them
• do not participate in the bulk electronic update:
• the system will automatically issue a letter, and
• a defined benefit income stream schedule to the customer or their partner on the indexation date

The letter requests the customer to get the schedule completed by their income stream provider and to return it in the enclosed reply paid envelope. If the provider/super fund issues their own schedule, the customer is asked to attach this schedule to the covering letter and return both in the reply paid envelope.

The schedule will be pre-populated with the product details, that is, product provider name and product reference number and will be based on product details available on the customer's or their partner's record.

Customers and/or their partners have 21 days from the date of issue of the letter to provide Centrelink with the details. A reminder letter will automatically be sent after 28 days if there has been no response. If the customer or their partner does not respond to the reminder letter within 28 days, their payments will be automatically suspended. Their payment will cancel after 13 weeks from the suspension where there has been no reply or updates made.

When the requested details are updated on the system, the date of event (DOV) will be the date of receipt of the details.