Retirement Income and Age Pension – Your Questions Answered


Retirement Income and Age Pension

Your Questions Answered.

Su’s question: 

After watching my video: 9 ways to hide money from Centrelink:  Su asked: 
Wait so the home is an exempt asset ?? How about for age care fees………. My uncle is telling me that the house I’m living in must be sold to pay the nursing home RAD of $550,000 ……………………… I tried to explain to him that the pension can cover the nursing home fees for my mum but he insists that it is the only way to pay them and that paying the daily care fee’s and accommodation fee’s out of my mums pension is not allowed………… I really need some help with this do you have any experience in these types of situations ??? I am trying to figure out a way that my mum can continue to pay her nursing home fees with her pension so i don’t need to move out from here………> If I have to move out from here it will be just terrible and i will probably end up being homeless because i cannot work due to a disability……   

Su, your situation is more complicated. What I can say is that if you have a disability, it is prudent to assume that you might be a recipient of a disability pension from Centrelink. If this is the case you are what is called a Protected Person and you can continue living at home and home will continue to be exempt from Aged Care fees.

If however you are not receiving a disability pension from Centrelink or any other Centrelink payment this case is becoming more complex and you really need personal advice.
So please contact me to get more clearance of your choices. 

Mohamed said

Hi Katherine, I did apply for my pension 2 years ago I did advise my full asset, I feel that I never use or cash in my supper. My supper keeps going up. I can’t withdraw cash because it will be considered as an income, therefore I lose half the amount I withdraw from pension. What shall I do now? All my assets cannot be touched unless I give up the pension. Please let me know.  

Mohamed, if you are receiving Age Pension already, it means that you pass the Age Pension age, and you also reach your Preservation Age, therefore you are allowed to have access to your superannuation savings.

If you are receiving Age Pension, Centrelink calculates your super savings the same way regardless if it stays in super, which is the accumulation phase, or whether you move it to an income stream, which is your income phase, because at this age super balance and income stream balance are treated in the same way under Asset Test and under Income Test.

So what does it mean?

Under the asset test, it will be the total balance of your super or of your income stream, or under Income Test, your savings are subject to deeming rules, which means Centrelink does not really care how much income you actually draw from your income stream, they will deem it anyway.

If you are not sure about Deeming Rules watch my video Age Pension Income Test Madness.

If you are only receiving a part pension, it is likely that your pension could be maximised so contact me to find out how it can be achieved and how you could receive a higher income. 

Herman said: 

I am turning 61yo this year and am working full time. I am married and my wife is 50yo and is working part-time. If I want to retire when I turn 67yo and my wife will continue working part time, then will the income and asset tests to be applied for age pension be the Single or Couple one 

Kevin asked: 

When you talk about single/combined persons, how do you categorise when one person is still earning a wage and well under the age pension age and the other person has little or no wage but is approaching age pension? 

A number of people asked that very question. Obviously this is a little bit of confusion, so let’s review this situation. 

One person is eligible for Age Pension and is ready to retire, while the partner is younger, still working and obviously not of Age Pension age yet.
How does Centrelink calculate the Age Pension payment and how it treats the income of working partner? 

Centrelink will obviously look at the person applying for Age Pension as a couple at that point, after all you do have a partner. The fact that only one person is eligible for Age Pension payment is irrelevant. As far as your relationship status is concerned you are a couple.

You have to disclose all the assets that are yours and your partner’s, so all assets of the family. But do you remember my video 9 ways to hide money from Centrelink?

Please watch this video as it will tell you exactly how you can use your younger spouse to legally hide money from the Centrelink Assets Test assessment, and actually increase the outcome of the Age Pension for the person who is eligible.

What about your spouse’s income? 

Yes, you guessed it! You have to disclose full income and it is calculated under Income Test exactly to the dollar earned.

This could reduce the Age Pension entitlement quite dramatically, so at this point you really have to ask yourself a question: is it worth for my spouse to be working full-time or maybe part-time work is better. 

DJ asked: 

I would like to retire when I turn 60 from 60 till 67 could I get pension from my super, I am 55 years old now 

DJ, at the age of 60 you reach your Preservation Age and if at that point you decide to retire you also meet Conditions of Release, which means you are entitled to have access to your superannuation savings.

This is exactly what I explained in details in my previous video When can I have access to my super.

For seven years you can draw income from your superannuation fund that obviously you rolled over to your pension fund. Once you reach age of 67 you can apply for Age Pension.
It all sounds perfect but just make sure that at the age of 67 you still have a sufficient balance in your superannuation savings to assist you with income for the rest of your life. Longevity is a real issue. A lot of people do run out of money far too early, and this is a real concern. You do not want to end up with Age Pension as your only source of income.

If you don’t know how long your money will last, this is where you have to speak to a financial planner that actually has technical knowledge about retirement income stream, longevity and how to ensure that your income will last for as long as you need to feel free to contact me if you wish to receive more advice 

Kira’ question: 

Am I better to take a small pension from my super account to top up my age pension or would it be better to leave the money in super account and hence reduce my incoming income and maybe get more money from Centrelink? 

Kira this is a very similar question to Mohamed’s question that I mentioned before. Once you are eligible Age Pension, under Income and Assets Test, your superannuation savings are treated in the same way whether they are in a super or in an income stream account, so you might as well turn your superannuation savings to an income stream account and enjoy extra income.

Just keep it to the minimum so your pension fund will last you for longer.

To make it bluntly clear, by you keeping savings in superannuation if you are of Age Pension age, you are not increasing Age Pension payments. It has zero impact.

If you are not receiving the full Age Pension payment, please contact me to find out what is the reason for the reduction and maybe how you can increase your Age Pension entitlement. 

Paul’s Question: 

Hi Katherine, if I’m 2 years away from my age pension age, want to retire now for personal reason, access my super to pay the remaining mortgage. Would I still qualify for part age pension in 2 years’ time? Thanks in advance. 

Retiring two years before being eligible for Age Pension makes you 65 now, hence you have access to your superannuation, and you can draw part of all of your superannuation for whatever the reason, not that I am recommending this though.

If you however have an outstanding mortgage most certainly pay it off, even if that means reducing the balance of your superannuation. You really don’t want to have any debts when you retire.

I often repeat that Centrelink will look at the last five years of your asset transaction and decide which transaction is acceptable, for example, gifting, and which is not.

Withdrawal from superannuation to pay off your debts is not regarded as a deprivation of assets therefore, you most certainly can do it.

Then at the age of 67, you will advise Centrelink that the reason for your withdrawal was to pay off your debts. Centrelink will accept it with no issues whatsoever, and you are on your way to be assessed for Age Pension entitlement with the remainder of your assets.

Providing you are eligible under the Income and Assets Test at that time, you will receive your entitlement.  

Young asked:  

Hi it’s great information I have a house in NZ which is renting to someone and i am living in a rental house in Australia Can my house be excluded as an asset? Thanks  

The answer is – unfortunately not. You actually have to live in a house. It has to be your home, and then it can be excluded from the Assets Test.
In this situation the house in New Zealand is regarded as an investment property and counted under Assets test, but as a benefit, you are regarded as a non-home owner, with a higher asset test allowance. And you could be eligible for rental assistance. Watch my previous video Your questions answered that explains the rental assistance in more details  

Biliana asked: 

Does super funds also count as deeming income when you retire? 

Absolutely,, once you retire Centrelink will count your super under Assets Test and estimate income as per deeming rules, regardless whether you draw income or not and regardless if money stay in a super or it if it has been moved to an income stream.  

Catherine wrote: 

Do you have to take a pension account once you reach Centrelink pension age what about advice for those who have small supers most advice are here is for people who have million or so i wish what about if superannuation balance at retirement is below the asset limit for couple of a of each pension about four hundred thousand the pension account allocation at four or five percent would be small so wouldn’t it be better in a super fund waiting for a rainy day any good income and have no pension account 

This is a similar situation to Biliana’s. Catherine, whether you keep your money in super or you move it to a pension fund makes no impact on your Age Pension payment, Centrelink calculates them exactly the same way. 
However, don’t forget that if you keep money in the superannuation all earnings are subject to 15% tax while a pension fund does not pay any tax at all.
So given a choice, why would you keep money in an account that pays tax on your behalf if you don’t have to? 

Yes, once money moved to a pension you do have to receive your income payments, but if you have sufficient income from other sources, who says you have to spend it? 

Start good savings plan on the site and get similar returns to those from your super fund.
If unsure how to do this, just contact me for extra advice. 

Ondrea wrote: 

Thanks Katherine, your videos are a great help, even though the system is SO confusing! My husband is retiring next week and is receiving a reasonable payout from 25 years with a company. We will be putting the money in the bank. Is this classified as income or an investment. I don’t think it’s fair being classified as both. Hopefully he may still get part pension. I am not at pension age yet. Thanks again for your great work, you put a lot of effort into your videos! 

Well thank you so much Ondrea, yes, it is a lot of work but I do enjoy it.  

Please watch my famous video 9 ways to hide money from Centrelink that will assist you in your situation. 

But, first thing is first your husband’s payout is not going to be treated as an income, but it will be counted as an asset. 

Leaving your husband’s payout in a bank account is really not the most efficient for your husband’s Age Pension entitlement. It can be officially hidden in your superannuation until you reach your Age Pension age, but you have to know superannuation contribution rules and limits to do that. You could benefit a lot as long as it is done within allowable rules, to make sure you are not subject to any penalties. 

My suggestion is to organise your assets well before you make an application for Age Pension. 

If you are unsure how to maximise Age Pension for your husband, just contact me directly. 

If after reading this blogpost, you feel that you have not maximised your Age Pension benefit, or you want to improve your overall retirement income or to ensure it will last you a lifetime, I am always happy to help to bring certainty and security of your income and your assets.   

“Retirement is a Journey NOT a Destination, So please, be well prepared for the ride” 

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement

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