THE age pension for singles is about to increase by $35.80 fortnight - couples will see an increase of $27 a fortnight per person.
This means it is timely for anybody nearing retirement to understand the way the pension is assessed.
Applicants are assessed under an asset and an income test and the one that gives the least pension is the one used. The family home is not counted, while chattels such as furniture, car and boat are valued at second-hand value, not replacement value. This puts a figure of $5,000 on most people's furniture.
The asset cut-off points for a homeowner couple are currently $1,050,000 and for a single pensioner $707,750.
The income test cut-off points are $67,537 per annum for a couple and $44,127 for a single.
Financial assets are deemed to be earning 2.5% for the first $75,600 ($45,400 for singles), and 4% on the balance. For example, if a couple had $300,000 of financial assets their deemed income would be $10,866 a year being 2.5% on $75,600 ($1,890) and 4% on $224,400 ($8,976). These include interest bearing deposits, debentures, shares, share trusts, and friendly society and insurance bonds. However, it does not include property, and money in account-based pensions.
Your superannuation is not counted until you reach pensionable age. We often encounter situations where the husband may be 65 or more and where the wife less than 60. Wherever possible we encourage as much superannuation as possible to be held in the wife's name, as it is not counted by Centrelink, and this enables the husband to maximise his pension.
Unfortunately, many people in their late fifties do not understand these rules and start an account-based pension when they should have simply relied on withdrawals from their superannuation. As soon as they start the account-based pension, its value counts for the asset test even if they have not reached pensionable age and they often render themselves ineligible for Newstart.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: firstname.lastname@example.org.
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