In part 2 of this series we take a look at some strategies retirees can use to make the most of their Age Pension entitlements.
The Government has legislated changes to the Age Pension rules from 1 January 2017, which it estimates will see 300,000 Australians lose all or part of their pension entitlements.1
If you are retired or about to retire, some careful planning now may put you in shape to access at least a part Age Pension. Here we outline some strategies to consider.
Building up the super of the younger member of a couple
If you are retired and have a spouse who has not reached Age Pension qualifying age, making contributions to your spouse’s super account may be beneficial. This is because super in the accumulation stage is not counted towards the Age Pension assets or income tests until the member reaches Age Pension qualifying age or begins an account-based pension.
Gifting money (for example to a family member or charity) can help to reduce your assessable assets. The Government has set a limit of $10,000 per financial year for a single person or a couple, limited to a total of $30,000 over a five-year period. If you are planning to gift more than the allowable limits, check the rules here as penalties may apply.
Pre-paying a funeral plan
While it is not something that everyone would like to consider, pre-paying for a burial plot or funeral expenses can make good financial sense. As well as saving your family expense when you die, prepaid funeral plans and burial plots are not assessable assets for Age Pension purposes.
Using certain income streams
Certain annuities are assessed more leniently under the Age Pension rules than other investments, which may help you to achieve a higher level of Age Pension.
When purchasing a term annuity, you can select the proportion of capital (residual capital value) you would like returned to you at the end of the investment term. Annuities with a residual capital value of less than 100% are generally assessed favourably under the income and assets tests.
Speak to your adviser for more details as the rules differ depending on when an income stream was commenced, its term and your life expectancy.
If you are concerned about how the upcoming changes to the Age Pension rules will affect you, arrange a meeting with your financial planner who can help you to structure your income and assets to make the most of your entitlements.