A surprising number of actions will influence how much Age Pension is received over the years. In the list below it has been assumed that individuals or couples want their private assets to last for an appropriate period. In other words, the strategy of spend up big and drop back to living on the Age Pension is dismissed in favour of a smooth, sustainable and comfortable retirement income plan.
Some of the strategies that need to be considered because they influence the Age Pension received over the years include:
Since superannuation is not counted as an asset until Age Pension age, it is worthwhile to have as much super in the name of the younger person as possible. This can be organised with withdrawal from the older and re-contributions to the younger.
- Holiday homes lead to reduction in Age Pensions via the asset test without generating income. Tidying up these assets and/or transferring to children will have CGT and stamp duty ramifications.
Until 01/01/2015 certain individuals will need to assess whether the income test under the grandfathering provisions will lead to a better outcome than the new deeming income test.
Under the current rules, the Centrelink deductible amount and (hence) the income test for the Age Pension can be influenced by whether the ABP is reversionary or not. It’s irrelevant under the new test.
Planned cost of living increases and level of step down on the first death have a surprising impact on Age Pension entitlements in many situations, even if the planned duration for the asset usage is kept constant.
Non account based pensions that have a linear run down may result in a more favourable asset test than an account based income stream.
Converting old legacy lifetime pensions may result in the loss of Asset Test Exempt Status, but still an increase in the sustainable income that can be drawn by making all assets work to produce an income rather than being stuck in adequacy reserves.
The focus above has been on increasing Age Pension entitlements. If the emphasis was broadened to improving total retirement income, then there would be many other aspects to consider. These range from using super tax effectively when retiring between the ages of 55 and 59 to the impact of post Age Pension age part time work.
This area is going to receive a lot of attention because of the ticking clock nature of the grandfathering provisions for the Age Pension income test. NetActuary has developed a cost effective analysis report that can be used for your clients.
The NetActuary Team