Finance Q&A
Centrelink specific Q&A on frozen funds
The Government is closely monitoring the global financial crisis and its impact on pensioners and has asked Centrelink make a special one-off update of our system with the current value of any shares and managed investments that pensioners might hold. This will be done in the next few weeks to ensure pension payments are based on the most up-to-date asset values available.
Q. How often asset evaluations are carried out for full or part Age pensioners?
A. Generally, updates on shares and investments are only made twice a year in March and September, however people can ask for a revaluation of their personal financial situation at any time.
Q. Is this review a one off? Has it been brought forward? If so, when was it originally scheduled?
A. Centrelink will automatically reassess the share values it has on customer files and adjust people's payment rates where necessary. If customers who have investments and who are on a part rate were expecting a change in their payment and this doesn't happen after several few weeks, they should call Centrelink on 13 2300 to discuss the situation. If possible, people should have their investment certificates handy to help speed up the process.
Q. What of those NOT on an age pension who may now be eligible because of lower assets – how do these people go about applying?
A. If affected investors are not currently Centrelink customers then they can test their eligibility for a Centrelink payment or ask to talk to a Financial Information Service Officer by calling 13 2300. Claims for Age Pension can be lodged online at
http://www.centrelink.gov.au, over the phone or at Centrelink offices.
Q. For those whose assets are NOT FROZEN but need money urgently, an Advance payment may be available – can you share a brief synopsis of what an advance payment is and when/how it needs to be paid back?
A. Advance payments are an advance on a person's regular pension payment, up to $500. The advance always has to be paid back through a reduction in a person's fortnightly pension. People can only get an Advance Payment if they are on certain Centrelink payments (including the Age Pension) and can only have one advance in a 12 month period. More information is on the Centrelink website here:
Advance Payment
Centrelink also have a
Hardship information factsheet.
Financial problems
Recent financial market volatility may mean that many Australians will have to work longer and harder, putting their long-anticipated retirement plans on hold. Financial Planner, Richard Sheargold, discusses what the world’s recent financial problems may mean for your savings.
Q. Is the global financial market collapsing?
A. Not quite. The funds have dried up significantly in the US and to some degree Europe and what is available is rather expensive. So only the AAA rated companies are prepared to borrow or can borrow at the moment. This WILL dissipate, when: I can`t answer that one.
Q. Why has this situation suddenly occurred?
It has been a build up over several months even years. However now we are seeing the effect of the high cost of borrowing as some investment banks are finally telling the truth. some of these investment banks were at least 30 times leveraged. That means for every dollar in the bank that had $30 borrowed.
Q. We keep reading about major bank collapses in America – and now the UK. Is this the beginning of the end? Are we headed for another Great Depression?
A. This is crystal ball gazing I`m afraid. The short answer is I highly doubt we are headed for a depression or even recession. Remember the collapses are investment banks and mortgage companies who lent to bogus mortgagees and continued to package these loans again and again. Economic fundamentals are still very good in Australia. Remember we own a lot of the resources that Asia need.
Q. When commentators refer to Wall Street and Investment Banks what bearing does this have on the Australian economy?
A. Very little
direct effect on our economy. But as we have seen it has a large bearing on our share market. The two are often mutually exclusive. The share market has dropped over 25% this year and Australia should still have a 3% increase in GDP (what we produce). You can see the disjoint
Q. Are Australian banks likely to collapse?
A. Highly unlikely. We have strict `capital adequacy` rules in our banks which means banks have to cover derivative exposure with cash. This is not the case in the US. The US banks self regulate. That`s like putting chocolate in front of daughter, telling her not to touch it and then leaving the room. You get the picture...
Q. My superannuation is now worth about 20% less than it was a year ago. Should I delay my retirement? If so, by how long?
A. That`s a tough question. Remember that the markets WILL come back. If you retire you can be rest assured that over time your portfolio should have a positive return and regain some of those losses.
Q. Most of my superannuation is invested in the Australian stock market – should I cut my losses and convert to cash? Will I need to change funds to do this?
A. Once again this is giving advice. I think if you have done the hard yards now though, by selling, you would just be crytalising those losses (assuming there are losses). As I said earlier, at some point the market will recover and if you sell now when do you buy back? Remember that we only find the bottom of the market in our rear view mirror. Anyone who thinks they can pick the bottom is delusional.
Q. What are the best strategies for retirees on fixed incomes when financial markets are so very volatile?
A. Retirees should ALWAYS have at least 3 years worth of their pension payments in cash anyway and then another two years in fixed interest. This allows the share market time to recover during uncertain times like now. That way the retiree doesn`t have to draw down on growth assets (such as shares and property) whilst the market is very weak, crystallising losses.
Email:
Website:
www.stonebridgews.com.au
Centrelink pension
Q. Glennys
My husband and I receive a part centrelink pension calculated on our assets ie an allocated pension acccount held with State Super.
My question is:- Is 100% of the allocated pension account balance considered an asset? We own our own home and have no other large assets.
A. Provided by Hank Jongen, General Manager, Centrelink
How an allocated pension is treated under the Centrelink assets test depends on when the pension was purchased and whether the income stream is considered long-term or short-term. For example, Lifetime income streams purchased before 20 September 2004 are 100% exempt from the assets test. Life Expectancy or market-linked iIncome streams purchased on or after 20 September 2004 but before 20 September 2007 attract a 50 per cent exemption. For income streams purchased after this date, there is no exemption.
To find out how your income stream is treated under the assets test, you should speak to Centrelink on 13 2300.
Assets
Q. Heather
Recently I was speaking to Centrelink (telephone discussion) to update some personal details. I was advised that the value of contents is added to any investments, e.g. bank account interest, to work out if there has been an income from these “investments”. Could you please advise if this is correct as I have always understood that Contents was a depreciating asset & fail to see how to reconcile this with bank interest.
A. Provided by Hank Jongen, General Manager, Centrelink
Thanks for your enquiry. It’s important to highlight that pensions are subject to two means tests, called the income and assets tests. Centrelink works out the pension rates under the income test and the assets test and pays whichever is the lower of the two rates.
Under the income test, financial investments are subject to deeming. This relates to the full range of financial assets, including cash management accounts and term deposits. Deeming assumes your financial investments are earning a certain rate of income, no matter what income they are actually earning.
Home contents are not subject to deeming or any other type of income test. The current market value of your assets is treated separately under the assets test.
If you are unsure about how this affects your individual circumstances, talk to Centrelink by telephoning 13 2300 or visit your local Centrelink Customer Service Centre.
Living status
Q. Wings
Can two people now live together and both get the single pension? I know of a couple who are and they get over $1,000 a week between them! Doesn’t seem fair to me when we singles have to struggle of $551.20 a fortnight.
A. Answer provided by Hank Jongen, General Manager, Centrelink
When determining someone’s rate of payment, we look at a number of factors including income and assets as well as whether the person is single or a member of a couple. To work out if someone is considered to be living in a marriage-like relationship, we look at factors such as financial aspects, social aspects and the nature of the couple’s commitment to each other. However, no single factor is decisive. Centrelink needs to consider all the information presented to determine whether a relationship between two unrelated persons of the opposite sex meets the definition of a member of a couple.
If two people are determined to be living in a marriage-like relationship, they are be paid at the partnered rate.
If you suspect someone is living in a marriage-like relationship but not declaring it to Centrelink, you can pass this information to us by calling the Australian Government Services fraud tip-off line on 13 1524.
UK residents
Q. Judy
My neigbours are from the UK and receive a UK pension. They have been told that they will have to wait a long time to become Australia residents(75 and 72). They have a son who was born here (28 years ago) when they lived here in Adelaide and then went back to the UK. I am inquiring is there a health card they could receive as they can not get a medicare card if though they have lived here for six years and own their own home. It seems very unfair for them that they cannot receive any discount on rates, car rego etc and have to pay for doctor"s visits and full price for prescriptions. Any information you can give me so I can try to help would be most appreciated.
A. Answer provided by Hank Jongen, General Manager, Centrelink
Thanks for your email. In general, social security payments from Centrelink are only available to people who reside in Australia and are either Australian citizens or holders of permanent visas. In addition, most social security payments and concession cards have a two year newly arrived resident’s waiting period.
If your neighbours are permanent visa holders, they may be entitled to a Low Income Health Care Card or the Commonwealth Seniors Health Card, which provide access to Commonwealth health concessions, State and Local Government concessions and those provided by some private businesses. When looking at their circumstances, we will take into account how much they earn and whether they have lived in Australia for at least 104 weeks.
As always, we look at a range of individual circumstances when determining whether someone is eligible for assistance. I encourage your neighbours to discuss these options directly with Centrelink, either at their local Customer Service Centre or by telephoning 13 2300. Alternatively, the range of options and eligibility criteria is available at www.centrelink.gov.au
Military superannuation
Q. Doreen
Hi,can you give any info on Military Superannuation? I.e. is the govt going to increase it?
A.We are unaware of any increase the Government is planning to make to Military Superannuation but would direct you to their website, which has updates and useful information on who is entitled to what. You can access the site buy clicking the link below.
http://www.militarysuper.gov.au/latestnews/rev_pens.html
Taxable allowance
Q. Harry
I would like to know what a pensioner (old age) is allowed to earn before he has to pay tax. I have 2 small pensions from overseas and a part Australian pension, all up about $30,000. per year. I have a small parcel of shares, which had a hammering in the last year or so, if I sell a few shares, not more than $7000, do I have to pay tax on this? Looking forward to your reply.
A.Harry, it all depends on your individual circumstances and whether you can claim any of the tax offsets available to you. To ascertain what you would be liable to pay, you should contact the ATO. We have contacted the ATO, who will not comment on individual however, they have passed on the following information:
Tax rates 2008-09
Taxable income
Tax on this income
$0 – $6,000
Nil
$6,001 – $34,000
15c for each $1 over $6,000
$34,001 – $80,000
$4,200 plus 30c for each $1 over $34,000
$80,001 – $180,000
$18,000 plus 40c for each $1 over $80,000
$180,001 and over
$58,000 plus 45c for each $1 over $180,000
There are some tax offsets available to seniors and the Senior Australians tax offset calculator”>Senior Australians tax offset calculator available on the Tax Office website can help people work out whether they are eligible for the senior Australians tax offset and if so the amount.
More information for seniors and retirees is available at http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/025
Telephone allowance
Q. Jan
Hi, how are you. I am sure we had to sign a form and return it to Centrelink to let them know if we had the internet on and they would send us a bonus of $30 to help us. Have we got it yet, is it once a year or once every three months or have I got it all wrong? Hope you can let me know. Many thanks, and I love your newsletters.
A.
We believe that you are referring to the Telephone Allowance. If you meet the requirements, this is paid at a rate of $22 per quarter and $33 per qurter if you are connected to the internet. Below are two links, one to the Telephone Allowance factsheet and one to Centrelink information on how to claim?, are you entitled? etc. Hopefully these will answer your question and you’ll receive your allowance soon.
Telephone Allowance factsheet
Centrelink information
Work dilemma
Q. Rita
I have been offered a job lasting about 5 or 6 weeks, part time. I will receive about $800.00 in total for this work.
I see that an old age pensioner, single, can earn $138.00 per fortnight. This makes it $3588.00 per year.
Will my miserly $800.00 have any effect on my pension?
I desperately need some extra money, but not if I am going to loose some of my pension, as it just wouldn’t be worth it, would it?
As I mentioned before this will be over about 3 fortnights, out of the whole year.
When you divide the $800.00 by 26 fortnights, it would come to about $31.00, per fortnight,
but it would actually be $800.00 divided by about 3 fortnights, which would be about $267.00, per fortnight.
Will you please offer a suggestion regarding my dilemma?
A. Answered by Hank Jongen, Centrelink General Manager
Age Pensioners have a range of choices if they decide to take on short-term or one-off employment opportunities in retirement.
Centrelink often receive calls from Age Pensioners who have been asked to play Santa Claus or work at their annual Show Day, who are worried about taking on the opportunity in case they lose their entitlement. It’s very important Age Pensioners who earn income talk to Centrelink, but it doesn’t mean they will be disadvantaged by working.
Generally speaking, a single pensioner can receive $138 a fortnight before their pension is affected at all, and a couple can receive $240 a fortnight. After this, the pension reduces by a set rate for every dollar of income above these amounts.
In some circumstances, an Age Pensioner’s total employment income from a short-term job can be averaged over 12 months or else annualised just for the period of employment. Centrelink staff will discuss these options with you to work out which way is best.
If the period of employment is short but the income earnings are generous, a customer can decide to suspend their Age Pension altogether. It’s possible to suspend a payment for up to three months, and then restore it when employment ends without having to restart the whole pension claim process.
As always, I encourage Centrelink customers to discuss their individual circumstances with Centrelink by calling 13 2300.
Newstart allowance
Q. Pam
I am 61 years old and thinking of doing some volantary work, to be able to claim Newstart, as my husband took an early retirement, and the share market being the way it is at the moment has eaten into our funds. I am aware you have to do 30 hours a fortnight, but wondered how much you get for that time. Look forward to your response.
A. Answer provided by Hank Jongen, Centrelink General Manager
You’re right in terms of the commitment each fortnight, because if you are 55 or over, you will be able to fully meet your obligations to receive Newstart Allowance by participating for at least 30 hours per fortnight in a volunteer activity agreed with your employment service provider or Centrelink, or combining paid part-time work and volunteering activities to a total of at least 30 hours per fortnight. You will still need to work with a employment service provider, have an Activity Agreement and accept any suitable jobs that are offered to you. To find out more, visit http://www.centrelink.gov.au or telephone our Employment Services line on 13 2850.
Carer breaks
Q. Peter
My wife is a carer for our adult daughter, and we are going on a 10 day holiday shortly, so I was wondering what we have to do in regards advising Centrelink; and then, does my wife lose her pension and allowance while we are away?
We are getting home help in while we are away.
A. Answer provided by Hank Jongen, Centrelink General Manager.
You can take a number of breaks from caring, up to 63 days per calendar year (1 January–31 December), and still qualify for Carer Payment and Carer Allowance. You can use these breaks in a variety of ways including having a holiday, visiting friends and family or for formal respite. You may also use these days if you are sick and cannot provide care for the person you usually care for.
If you take a break from caring and use up some of your respite allowable period, it’s important that you let Centrelink know.
Special rules apply if you are leaving Australia. Please contact Centrelink on 13 2717 for more information.
Senior Australian Tax Offset
Q. Frederick
I am a 62 years old male. As such, I am not pension age. My wife will be over 63.5 years by next June. As such, she will reach pension age. Because I am working, she will not receive a pension. However, there is a tax rebate for Senior Australians. Because my wife is not eaning money, her Senior Australian tax rebate cannot be used. But, this unused amount is normally transferrable to the spouse. However, because I am not at pensioner age, I am not sure if I can use my wife’s unused Senior Australian rebate. Will you be able to answer this question please?
A.We’ve sought an answer from the ATO who inform us that both parties must be eligible for the Senior Australian Tax Offset, i.e. both of pensionable age, before the unused portion can be transferred.
Below is a link to some more information from the ATO’s website.
http://ato.gov.au/individuals/content.asp?doc=/content/36498.htm&pc=001/002/025/006&mnu=3388&mfp=001/002&st=&cy=1
Age Pension allowance
Q.Juanita
I am a 75-year-old widow and grandmother who has been offered part time work at my grand daughter’s school. I am very excited at the thought of rejoining the work force (thank goodness someone thinks I’m still useful!), but wonder how much income I can earn before my (full) Age Pension is reduced or taken away completely?
A.Provided by Hank Jongen, Centrelink General Manager
The Age Pension is income tested, so you need to tell Centrelink about any income you earn.
For a single Age Pensioner your Age Pension payments will not be affected if your income from all sources is $138.00 per fortnight or less. If you commence employment then your employment income will be added to any other income that you receive.
You can receive a part pension if your income from all sources is $1,519.50 per fortnight or less. This amount is higher if your Age Pension includes Rent Assistance.
If your income exceeds $1,519.50 per fortnight your Age Pension payments will completely cut out.
Age Pension payments are also assets-tested, so any shares, investments or property you own other than your family home may also affect your pension payments.
Seniors can test their eligibility for Age Pension by visiting their local Centrelink Customer Service Centre, logging onto the Centrelink website at www.centrelink.gov.au or calling 13 2300.
Age Pension query
Q.Mark
I am 59 and on the Disability Pension. I was born 14.4.49, when do I transfer to the Age Pension?
A.Provided by Hank Jongen, Centrelink General Manager
The Age Pension is a safety net giving people who have reached Age Pension age adequate income in retirement.
To qualify for Age Pension a man must be aged 65 or over, but women qualify for Age Pension at different ages. From 1 July 1995 the minimum age for women to receive Age Pension began to increase.
By 2014, the minimum qualifying age for women will be 65 years, making it the same for everyone. Until then, the qualifying age for women depends on their date of birth.
Click here to view the Age Pension table which shows when women qualify.
Allocated annuity
Q. David
I want to cash in the remaining amount of my Allocated Annuity, how would that affect my pension?
A. Provided by Dante De Gori, Technical Manager - Business Support, ClearView Retirement Solutions & MBF Life Limited
The rule with Centrelink is that unless they are notified otherwise, any commutation (lump sum withdrawal) will be treated as additional income from their allocated annuity/pension and therefore affect the income test for the Age Pension.
If you notify Centrelink that it is a Lump Sum withdrawal then it will not be treated as income but rather the treatment will depending on what the client does with the money. For example if they place it into their bank account then the value of that bank account will be assessable under the assets test and then deemed under the income test.
Allowable earnings
Q. Ron
I am about to retire, but have been asked if I would be prepared to assist on a casual basis in the future, if needed. Could you please advise me how much a person about to go on the full age pension is allowed to earn per week without affecting their pension. My husband is on the full age pension already.
A.Provided by Centrelink General Manager, Hank Jongen
Centrelink works out the pension rates under the income test and the assets test and pays whichever is the lower of the two rates
As the Age Pension is income and assets tested, you need to tell Centrelink about any income you earn and any shares, investments or property you own other than your family home, as it may affect your pension payments.
To receive the full Age Pension, the combined income of you and your partner needs to be less that $240 each fortnight. Any income over this amount reduces the rate of pension payable by 20c in the dollar for each member of a couple.
In order to receive a part payment per fortnight, the combined income of a couple needs to be less than $2538.50 (including pharmaceutical allowance).
Under the assets test, to receive a part pension, couples who own their own home can have combined assets up to $856,500, while couples who do not own their home can have assets up to $981,000. As I said, the home itself is not counted as an asset.
I would suggest that you take a look at the Pension Bonus Scheme before you retire. If you register for the scheme, when you reach Age Pension age and work a minimum of 960 hours over the next 12 months, you may be entitled to a tax-free lump sum bonus when you do claim the Age Pension. Centrelink offers confidential, free, independent and expert information through the Financial Information Service (FIS). FIS Officers can give you information to assist in planning for your future and retirement.
And don’t forget to ask about Utilities Allowance, Telephone Allowance and even Rent Assistance if you don’t own your own home.
To find out more about the Pension Bonus Scheme or any Centrelink Retirement payments, services or products, call 13 2300, visit your nearest Centrelink office or log on to the Centrelink website http://www.centrelink.gov.au .
Rent assistance
Q.Denise
I would like to know if my husband and myself are entitled to rental assistance. We rent in the private market and my husband is working but not myself. What is the limit in order to qualify for rental assistance?
A.Answer provided by Centrelink
Rent Assistance is a payment provided to help Centrelink customers paying private rent or service and maintenance fees in a retirement village. To be eligible for Rent Assistance you must be receiving a payment from Centrelink (including more than the base rate of Family Tax Benefit Part A), which have their own income and assets limits. For more details, call Centrelink on 13 2300 or visit www.centrelink.gov.au and search ‘Rent Assistance’ to find information and factsheets.
Australian pensions overseas
Q.Graham
My position is I am 64 next birthday and have been living in Thailand for 4 years. I brought 80,000 AUD here and have been living on this money. I have money invested in Aust. and am still paying tax. I have been told to get the aged pension at 65 I would have to stay in Australia for 2 years or I would lose it if I travelled outside Australia. I phoned centrelink and was told that I could return now and get newstart and then get the pension. This seems unbelieveable that I have worked all my life in Australia and am a 5th generation Australian, also have paid taxes all my life. Centrelink also told me that they did not consider this. I consider this to be discrimination against someone who has done the right thing. My mother is still alive and my son and his children are in Adelaide. I travel home at least once a year to visit. I have emailed Centrelink but cannot get a personal response. I would be grateful for any information you can give me or any suggestions you may have.
A.We have passed your details to our Centrelink contact and asked them to respond to you direct. In the meantime, we suggest you contact National Information Centre on Retirement Investments (NICRI), who can advise the best course of action for money you have invested in this country and may also be able to advise on your pension issue.
For more information on NICRI, click here.
Utilities allowance
Q.Cassandra
I was wondering do we get the $125.00 payment 4 times per year or $500. I am not sure hope you can help.
A.Thank you for confirming you were enquiring re the Utilities Allowance. This payment is paid four times a year, on or in the fortnight after 20 March, 20 June, 20 September and 20 December. For more information on this allowance, click here.
Asset limits
Q.Ann
Hi, could you pelase tell me how much money you can have in the bank without it interfering with the pension? Our house is only worth $90.000.
A.Answer provided by Centrelink General Manager, Hank Jongen
Thanks for your question, Ann. Firstly, a person’s primary residence is exempt from the assets test for Age Pension, so the value of your home is not counted by Centrelink.
If you have no other assets, and are a single pensioner, you can have $70,333 in the bank or invested before your pension starts to be affected. If you are a member of a couple, and have no other assets, you can have combined savings and investments of $122,333 before your pension starts to be affected under the income test.
Age pension while overseas
Q.Alex
Hello my elderly mother (Australian living in QLD) may come to live with me for a while in the USA. Can she still receive her pension, benefits etc if she stays with me for 6 months? Can she get assistance in the cost of her travel to her location with me, she is elderly and suffers from several medical situations?
A.Answer provided by Centrelink General Manager, Hank Jongen.
In most cases, customers receiving Age Pension can continue to be paid if they spend time overseas. Depending on the period of time a person is away, their rate of payment may be affected. Australia has a social security agreement with the USA, which means people can sometimes continue to receive their payments for longer than they would otherwise. Because a range of factors affect whether you can receive Age Pension while overseas, it’s important your mother contact Centrelink about her planned trip as soon as possible. Contact Centrelink’s International Services Team on +61 3 6222 3455 for more information
Disability support pension
Q.Tony
I am receiving a part DSP, my wife works full time, I would like to know that if my wife refuses to give me the info that is required by Centrelink (her wage details) in order for me to get my support pension, Is my wife legally obliged to supply that information?. Although married and have joint bank accounts and live in the family home, we do live seperate lives, and enjoy our own seperate closed off space within the family house.
A.Answer provided by Centrelink General Manager, Hank Jongen.
You’re right that Centrelink needs to know about your wife’s income in order to assess your eligibility for Disability Support Pension. The income and assets you and your partner have can impact on your rate of payment. Although your wife isn’t legally obliged to supply information to you to pass on to Centrelink, failure to do so will mean Centrelink cannot pay you because we can’t calculate your correct rate. If you are already being paid and your wife’s income changes, you must let Centrelink know to avoid an overpayment that you would have to repay. Contact Centrelink as soon as possible on 13 2717 to discuss your situation further.
Q&A – John’s self-funded super
Q. We are going to be self-funded retirees next year when I turn 60 years of age. Does this allow us to be eligible for a health care and concession card?
A. Many self-funded retirees will be eligible for the Commonwealth Seniors Health Card (CSHC). To be eligible you have to be of Age Pension age and with a taxable income under $50,000 for singles and $80,000 for couples or $100,000 for couples separated by illness. There is no asset test for the CSHC. You can read a number of fact sheets on the Department of Families and Community Services website. This should give you a basic idea of what you may be entitled to and the eligibility criteria you need to meet. You can also get more information from the @boutSeniors’ Centrelink page
Q&A – UK Seniors’ Card
Q. Derek
My wife and I – both seniors and British Subjects in the UK on a State Pension – are visiting Australia later this year. Are there any concessions available to visiting seniors?
A. Unfortunately overseas visitors cannot apply for an Australian Seniors’ Card; however, it is common practice, though solely at the discretion of the supplier, to honour overseas Seniors’ Cards and apply the same discounts that would be received by holders of Australian Seniors’ Cards, so it is always worth asking.
Also, check out the @boutSeniors ‘Classified’ section click here for some fabulous discounts, such as 30% off Avis car hire. These discounts are available to all members of our site, not only those with Seniors’ Cards. We hope you have a safe and happy trip.
Q&A – lost superannuation
Richard Sheargold answers John’s question about where he might go to look for some old superannuation money.
Q. John
From February 1981 to December 1984, I was employed in NSW as a hospital laundry manager and then again from February 1985 to November 1985. During this time, I believe that I paid the normal superannuation as required. When I retired due to ill health in November 1985, however, I am unaware if I withdrew my super at that time. Can you please advise me as to whom I can get in touch with to receive an answer to my query.
A. It sounds like you were employed by the State Government of the time. Now back then super wasn’t compulsory; however, I am certain the State Government had the State Super scheme going. You have two options as I see it. Firstly, you could contact State Super at http://www.statesuper.nsw.gov.au/default.htm . They may be able to search for you. Alternatively, you may be able to search through the lost super website http://www.findmysuper.com.au/.
Q&A – assets test
Independent financial adviser, Richard Sheargold, answers a concerned daughter’s question about how the sale of her mother’s house will affect her Centrelink entitlements.
Q. Apryl
My mother is soon to sell her house and will live with my sister. She would like to know what assets she can have invested and how any income will affect her pension, which she is currently receiving as a single person.
Can you please provide me with some simple explanations, as I have to pass it on to my mother who is old and finds she gets confused easily.
A. I assume your mum is on full Age Pension. When she sells her home, she will be assessed by Centrelink under a slightly different set of rules. Your mum will be a single non-home owner so she will be assessed more favourably; however, she now has far more assessable assets, being the proceeds of the sale.
Centrelink will give some grace period for these proceeds but only if your mum is using the money to purchase a new home. As she will be living with your sister, the proceeds will be assessed at the next assessment notice.
Now, what to do with that money? Your mum’s Age Pension will possibly be impacted. Without dollar amounts provided I can’t give a clear indication. But assuming the Age Pension will be impacted, I would suggest that your mum will need to replace that lost pension with some income generated from the proceeds of the home. Also, there are certain products that your mum can invest into that will provide a certainty of income in addition to only being 50% assessed by Centrelink. Their rate of interest is not high but they invest into very secure assets so the risk is extremely low. Also, the extra Age Pension they would probably give your mum will compensate for the low return.
IF you would like to discuss this by phone. you can call me on (02) 9955 9633, email me at , or you can also have a look at my website www.stonebridgews.com.au
Richard Sheargold
Question & answer – Pension bonus
Independent financial adviser, Richard Sheargold, from Stonebridge Wealth Solutions, answers George’s question about working past the pension age.
Q. I turned 65 on 14th of this month. As I wish to continue in the workforce until I am 70, what steps do I need to take with Centrelink?
A. George, you should register with Centrelink ASAP for the Pension Bonus Scheme. This scheme allows you to work past pension age and if you pass the assets/income test you will accumulate a lump sum for when you do retire. However, very rarely will you fully pass the assets/incomes test if you are working. You may pass enough to get a part-pension and you can defer this payment until you retire fully. Out of interest, would be you be interested in a complying pension to gain more age pension in full retirement? If you would like to know more . Hope this helps.
Richard
Stonebridge Wealth Solutions
Phone (02) 9955 9633
Richard’s Q&A
Licensed financial adviser, Richard Sheargold, is available to answer your questions on everything financial. This week he looks at retirement village bonds and licence fees, and reverse mortgages.
Q. Val
I do not fully understand the difference between bonds and licence fees when entering into contracts with retirement villages. Can you explain them? Is a fee of three per cent of the value of the unit per annum for a maximum period of 10
years a normal rate for the licence fee? This would include maintenance but
the pensioner would have to pay municipal rates, water rates, electricity,
phone and gas.
A. From your question I think we are talking about retirement villages as opposed to hostels and nursing homes. The latter two are funded by the Federal Government and have a differing level of care attached to each. A retirement village is usually privately funded and run privately. The following table should help.
A bond is an upfront fee usually charged by hostels and retirement villages. They can differ wildly for retirement villages. The service fee is an ongoing charge that differs between the three forms of residence. For a nursing home and hostel, the daily care fee and the income-tested daily care fee depend on the level of age pension one receives. The ongoing service fee for a retirement village, however, is struck between the provider and the person entering the facility; that is, it is privately run and carries no government funding.
In terms of the costs you’ve quoted, you would really have to ring around to get a competitive price on a retirement village. The type of care and the location and the age of the facility will influence the cost of the upfront (bond) fee and the service fee.
Q. Elaine
We are considering a reverse mortgage because our circumstances have changed. My husband is 74 and has a health problem that has necessitated my having to retire. I’m 66, and now, although we can manage the mortgage and the body corporate and rates, we find it a bit difficult to have any left over for trips and entertainment. or any other major items that may arise.
The idea of a reverse mortgage looks good and I have researched the information and narrowed it down to two providers, but still have this feeling of apprehension.
A. It sounds like you already have debt (a mortgage) and what you want to do is combine this into a reverse mortgage. Firstly, have you approached Centrelink re the forced retirement? If not, it is worth a conversation with them.
On reverse mortgages, they can be very useful to free up some capital value of your home so that you can live more comfortably in retirement. But be warned, they capitalise interest until your death. If you have any children who may inherit your home, then they will inherit your debt as well. That said, my personal belief is that you can’t live on a shoe string budget so that your children will have a nice juicy inheritance. You worked hard for this capital so you could live comfortably on it in retirement.
If you go ahead with the reverse mortgage, make sure you invest the money wisely. Don’t just put it in the bank attracting fees and earning a return above the inflation rate. Always seek professional advice. I am more than happy to discuss this over the phone or in a consultation without any initial fees or charges.
Richard Q&A
This issue, AboutSeniors finance guru, Richard Sheargold, answers questions about superannuation and the complexities of the Age Pension.
Q. Ann:
I have just sold my property in New Zealand to help fund my retirement. I have $150, 000 in a tax-funded Super, S.A superannuation, which will attract 115% tax on withdrawal. I am nearly 70years old, currently fully employed. I have been told that if I can live off the interest from my NZ funds plus the interest from my super fund, I can put the whole of my post-tax pay into my current super before I turn 70, to increase my capital. If I use all of the money to purchase a small unit near the city, I would have only the pension to live on and I am undecided about whether or not to just rent.
A. I assume the 115% taxation is a typo....not even the NZ government would charge 115% taxation. Let’s assume you meant 15%.
If you are to be charged 15% on withdrawal, the money must be coming from a state government super scheme and is what we call unfunded. What you have been told is almost correct; however, you can contribute pre-tax to super not necessary post-tax salary (although you can do this as well). I assume they meant to talk to you about the ‘transition to retirement’ rule. This means that you can start an income stream from your superannuation and contribute your salary pre-tax to super.
This will be particularly beneficial after 1 July 2007 when the government changes the rules so that the income stream from super will be tax free. That means that by contributing (up to your age-based limit of $100,000) to super with your pre-tax salary you are only ever paying 15% taxation. This is a great strategy to grow your wealth and save on tax.
Buying the property in the city is a personal choice and not one I can help you with, I’m afraid. You have to weigh up the benefits of having a better cash flow in retirement and renting or buying and living off the age pension.
Q. Graham:
Coming up 60, I should have about $300,000 in Super, plus have a house valued at $400,000. But, being an ex-UK resident, I have a miserly $50 a week pension from the UK government. Does that disqualify me accessing the Australian Federal Government Pension? I have been in Australia for more than 20 years. If it doesn’t, are there any ‘guesstimates’ as to what it might be worth, bearing in mind I am single.
A. The assets and incomes test for the Age Pension is quite stringent but this doesn’t mean you won’t get at least some. As you have been in Oz for more than 10 years (and assuming you are a permanent resident), your UK pension (as miserly as it is) will count towards your Age Pension incomes test. Also, when you turn your super into an allocated pension, it will be counted towards your assets and incomes test....but only notionally. That is, not all of it will be counted for the incomes test. At $300,000 you should still receive some Age Pension (the cut off is $334,250) and have access to the Pharmaceuticals Benefits Scheme (PBS) which is very important. You will also get your health care card and travel cards.
There are ways to get more Age Pension by investing some of your super into products from which an income is paid and which are only 50% tested for Centrelink purposes. I am happy to discuss this if you can spare the time. Call me on 02 9955 9633 for a chat. One final thing, you say you are 60, the Age Pension won’t start until you are 65, unless you are after a service pension (war pension).
Smart money Q&A
AboutSeniors finance guru, Richard Sheargold, answers a question about Centrelink rules on gifts.
Q. Yvonne
My 83-year-old mother lives with me and my husband in our home. She receives most of the aged pension. She has approx $90,000 in her bank account but wants to lower this amount to around $30,000. She cannot gift the $60,000 to me as it will affect her pension. What options are available to her? I am an only child and she naturally wants to leave me as much as she can at the end of the day.
A. Centrelink states that an age pensioner can give $30,000 over a rolling five-year period and no more than $10,000 each financial year.
So, your mother can give you $10,000 per financial year for three years and not breach the gifting rules.
My calculations suggest that your Mum is breaching the incomes test (as opposed to the assets test), but only by a few dollars a fortnight. All your mum needs to do is give you $10,000 now and she should then get the full age pension. She could then give a further $10,000 on 1 July (new financial year) to be absolutelycertain. Just one thing, Yvonne, your question leads me to another question: Why isn’t the money invested to earn some long term capital growth and good income? If it is in an ordinary bank account then the interest would be minimal (at best) and the fees high. Centrelink don’t care what the money is invested in, they do their own calculation regardless of what the cash is earning, this is called ‘Deeming’. By having it in the bank alone, you are not beating inflation and therefore it is being eroded away and Centrelink are penalising your Mum regardless of where it is!
