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I am a full-time carer for my wife and have reached age pension age. Is there any financial benefit for me if I take the age pension, and can I receive both the age pension and the carer’s pension?
Regan Welburn of My Pension Manager says the carer payment and the age pension are assessed under the same tests and the payment rates are the same. You can’t have both, so you will need to decide which one is the most appropriate under your circumstances. The age pension is easier to claim as you only have to have attained pension age (along with meeting the residency and means testing requirements).
The carer payment is more restrictive when it comes to overseas travel and time away from the person you are caring for. However, the carer payment comes with an additional carer supplement of $600 a year, paid in the first fortnight of July each year.
Credit: Michel O’Sullivan
What most people don’t realise is that there’s an additional payment called the carer allowance. This can be paid in addition to your age pension (or carer payment). It is a flat $144.80 a fortnight. Those in receipt of the carer allowance will also receive the $600 annual carer supplement.
Generally, the “sweet spot” for most Australians is claiming the age pension and the carer allowance. That strikes the balance between having the flexibility of the age pension and receiving an additional $4364.80 a year from the carer allowance and supplement.
We are in our late 60s and are retiring soon. We have obtained a statement of advice from our financial adviser about our super which recommends that we switch from accumulation mode to pension mode. The minimum pension is currently 5 per cent a year, which will give us more than we need to fund our living expenses. Should we place any surplus funds into an interest-bearing account? Will that attract a tax liability?
There is a possibility the fund will grow because the earnings will be more than the 5 per cent withdrawals we are required to make. If that is the case, what should we do with the proceeds of our residence when we downsize. Should we put them in the bank or contribute the money to super? Is there a limit to how much the pension account can grow?
Your optimum strategy depends on what other assets you have. Thanks to a range of offsets, each member of a couple can earn $29,783 a year and pay no tax. You cannot contribute to a pension fund, so any excess drawdowns would have to be contributed to an accumulation fund where tax on the earnings is 15 per cent flat. Therefore, it would make sense to keep the money outside super. Once you sell your home, you can use the downsizing rules, which enable each member of a couple to contribute up to $300,000 from the sale of the house into superannuation, irrespective of their age or fund balance. Once you have used your transfer balance cap and established a pension fund, there is no limit as to how much the balance can grow as long as you are withdrawing the required minimum.
I am 66, my wife 61. We are still working and I’m looking to retire in the next two years. I have $700,000 in super, and my wife has $200,000. We also have $350,000 in bank accounts. Should I convert my super to pension mode or leave it in accumulation mode?
Given you are still working, it would make sense to convert your superannuation to pension mode, which will require you to withdraw 5 per cent of the balance each year by way of a pension. You could then re-contribute the amount you withdraw to your work superannuation fund, and if the employer contribution was less than $27,500 a year, you could allocate part of the recontribution as a concessional contribution, which would be tax-deductible. The balance would be a non -concessional contribution.
You have often written that it might be better to leave some money directly to your children to help a surviving spouse avoid the assets test. I am 71 and my spouse is 61. I have about $500,000 in my income stream, my wife has about $650,000 in her super accumulation. She is 61, so this is not counted as an asset, and so I get a small pension. My concern is I have two sons not yet on the property ladder, and your suggestion is therefore appealing. But I thought there were tax implications of leaving any money left in my income stream to them.
If you are happy for the children to wait for the money until you die, an easy strategy is to leave it to them in your will. If you wish to do it sooner, you could make a gift of say $200,000, which would be treated as a deprived asset for five years, but you could offset this by moving $330,000 from your super to your wife’s superannuation where it would not be counted. This would increase your pension a little and let you help the kids sooner rather than later.
Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: [email protected]
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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