Volume 9 Edition 8 Financial Care Services Newsletter

Online at Permalink: https://financialcareservices.com.au/newsletters/vol-9-ed-8/

Financial Care Services, the specialist adviser to seniors in transition to new lifestyles

Volume 9 Edition 8 – 31 August 2019

Does Centrelink count my superannuation when I ask for an Age Pension?

Does Centrelink count my superannuation when I ask for an Age Pension?
Yes, but exactly how your superannuation is counted depends on the type of superannuation benefit you take.

Long ago superannuation was a reward for working through until retirement from a major entity. Superannuation was a joint effort of the employer and the employee member.
Last century the superannuation schemes for public servants paid pensions to retired officers including teachers, and their widows. Some of these pensions could be commuted for a lump sum on retirement. But thousands of retired public sector workers are still being paid superannuation pensions every fortnight.

The Australian superannuation world changed in 1992 when the Superannuation Guarantee Contributions become compulsory for every employee who earned a minimum amount that month. These Superannuation Guarantee (“SG”) contributions must be accumulated within a superannuation fund until ‘retirement’ or earlier death.

The community hoped that seniors would in future have less need of the Age Pension because they had their own superannuation money. But not every retiree has a superannuation benefit big enough to finance their every need right through their retirement years.

Many retirees will be needing some Age Pension to ensure they can afford a basic lifestyle.

Counting your Superannuation in the Age Pension means tests

The Centrelink rules for counting your superannuation in the Age Pension means tests have changed over recent years.

Exactly how your superannuation is counted in the Age Pension means tests depends on when you started your Age Pension and what type of superannuation benefits you have.

Yes it is possible that your friend’s superannuation is treated differently for the Age Pension means tests. If your friend started receiving an Age Pension before 2015 then the he could be benefiting from the ‘grandfathering’ of the old means testing rules.

New claims for an Age Pension in 2019

Superannuation that could be taken as one big lump sum.

Any superannuation that you could take as a lump sum counts as a ‘financial asset’ when you claim an Age Pension in 2019. This means that the value of your allocated pension account balance will be counted as a ‘financial asset’ for your Age Pension means test assessment.

Also, any superannuation accounts that are still in accumulation phase will be included in your ‘financial assets’. You might have a superannuation account that is accumulating investment earnings after you have stopped work but not asked for this possibly ‘late’ retirement benefit to be paid into your bank account.

Also I if you are still in paid work then you would have an active accumulation superannuation account collecting your ongoing SG contributions.

Read more about ‘financial assets’ and the Age Pension means tests.

Retirement benefits taken as ‘defined benefit pensions’ not exchangeable for a lump sum

Superannuation pensions that are fixed from the start generally count in full as ‘income’ for the Age Pension Income Test. A discount of up to 10% of the pension payment might be allowed for the Income Test if you paid part of the cost of your retirement pension by making ‘member contributions’ whilst you were working to earn that pension.

The amount of the regular payment for a fixed, or defined benefit, pension is set when the payments start. The dollar amount of the payment amount could be increased each year by a set formula without changing the nature of the pension. For example, a flat increase in the dollar amount of 3% each year, or the lesser of 3% and the increase in the Consumer Price Index, CPI.

Last century most public sector superannuation schemes provided defined benefit pensions that allowed for a lump sum on retirement instead of the pension. But no further commutation options were available once the defined benefit retirement pension payments started. Many ongoing public sector pensions are increased in line with increase in CPI.

If you cannot exchange your retirement pension for a lump sum then the ‘pension benefit’ would not usually be counted for the Age Pension Asset Test. These pensions could be ‘asset test exempt’.

Help to understand how your situation fits in the Age Pension system.

Christine at Financial Care Services writes this Newsletter. She can help you to understand your Age Pension situation.

Ask Christine to help you navigate your Age Pension challenge.

Contact Christine at Christine@financialcareservices.com.au or call 03 9808 0338 to book a consultation.

Christine at Financial Care Services is experienced with Pension Applications and the many Centrelink financial means tests.
Christine could help you check if you are eligible for an Age Pension.
An estimate of your potential Age Pension amount before you apply could spare you a rejection letter from Centrelink.

Financial Care Services offers ‘personal financial factual information’ consultations to help you check your asset and income position against the Centrelink Pension means tests. Christine is also able to assist with filling in your Centrelink forms ready for you to sign. She could accompany you to a Centrelink office to lodge your Pension claim form and show your proof of identity documents.

Financial Care Services charges hourly rate fees for ‘personal financial factual information’ consultations, assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you. Email Christine@financialcareservices.com.au now for the Client Services Guide and Financial Care Services Age Pension Personal Data Checklist.

Grandfathered deals for earlier Age Pensioners

If you had started receiving and Age Pension and an allocated pension or superannuation income stream contract before 2015 then that contract continues to be treated under the old rules for Age Pension means testing.

But if you change your allocated pension provider or the superannuation income stream contract is changed significantly then you will be switched to the new Age Pension means testing rules. Therefore you will lose any means testing advantages that your ‘grandfathered’ superannuation income stream contract had if you change your contract.

The annual adjustment of your allocated pension payment rate is not a change of contract. Hence you would not lose the ‘grandfathered’ means testing advantages when you were required to increase your superannuation income stream payments.

Superannuation annuities purchased before 20 September 2004 are generally ‘Asset Test exempt’. Some Asset Test concessions were allowed for superannuation annuities purchased in the following three years.

The old rules for superannuation annuities, allocated pensions and income stream products included a special formula for the part of your payment that counted for the Age Pension Income Test. The amount to be counted for the Income Test under this special formula is different from the amount determined under the new rules.

This special formula continues to be used provided that you do not change your superannuation income stream contract.
Using the ‘grandfathered’ Income Test rules might generate more Age Pension than under the new rules.

New aged care customers at Centrelink

Centrelink use the same definition of ‘assessable income’ for both the Age Pension and the Aged Care Means Tested Amount.
For current Age Pensioners seeking an Aged Care Means Tested Amount assessment, Centrelink can just use the same asset and income data that you provided for your Age Pension.

If seeking an Aged Care Means Tested Amount assessment is your first interaction with Centrelink then you will need to provide every detail of your assets and income. As a new customer, your allocated pension account will be counted as a ‘financial asset’ when you ask for an Aged Care Means Tested Amount assessment.

Help with the Age Care Means Test forms

Christine at Financial Care Services writes this Newsletter and our Age Pension Guide. She can help you to understand your Aged Care costs. As a self funded retiree you might choose to just pay your actual aged care costs and not disclose your asset and income situation to Centrelink. .

Ask Christine to help you navigate your Aged Care Entry cost challenge.

Contact Christine at Christine@financialcareservices.com.au or call 03 9808 0338 to book a consultation.

Christine at Financial Care Services is experienced with the Aged Care entry forms and the many Centrelink financial means tests.
Financial Care Services helps seniors with Centrelink Aged Care and Age Pension means testing issues. Christine at Financial Care Services could help you check if you are eligible for any Aged Care fee subsidy.
An estimate of your potential Aged Care fee subsidy and Means Tested Amount before you apply could spare you the hassle of submitting full asset and income data to Centrelink when you are only eligible for an Aged Care fee subsidy once the Annual Cap or Lifetime Cap is reached.

Christine at Financial Care Services offers ‘personal financial factual information’ consultations to help you check your asset and income position against the Centrelink Pension means tests. Christine is also able to assist with filling in your Centrelink forms ready for you to sign. She can accompany you to a Centrelink office to lodge your Aged Care Asset and Income form and show your proof of identity documents.

Christine charges hourly rate fees for ‘personal financial factual information’ consultations, assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you. Email Christine@financialcareservices.com.au now for her Client Services Guide and Financial Care Services Age Pension Personal Data Checklist.

Christine at Financial Care Services your independent adviser

Financial Care Services is an independent advisory service specialising in retirees of modest means and aged care entrants. Our core values include working with clients in claiming DVA and Centrelink entitlements.

The team at Financial Care Services are here to answer your Age Pension questions and guide your understanding of aged care costs. Help with Centrelink challenges is available from Christine Hopper at Financial Care Services, the specialist adviser to seniors in transition to new lifestyles.

Christine charges fees based on the work involved in advising you about pensions and aged care fee solutions.

To make an appointment for confidential, independent and professional advice about aged care, retirement lifestyle, granny flat or Age Pension issues please contact Christine Hopper or call +61 3 9808 0338.

______________________________

Christine Hopper
Financial Care Services Pty Ltd
Independent aged care, strategic lifestyle and Social Security advice for seniors in Melbourne, Victoria, Australia
Telephone – call +61 3 9808 0338
Email – contact info@financialcareservices.com.au
Address – mail to 172 Warrigal Road, Camberwell Victoria 3124
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Disclaimer: The information contained in this newsletter is of a general nature only and does not constitute “financial advice”.
All eligibility for Commonwealth benefits will be determined by Centrelink or DVA, based on your personal position as documented and the legislation and Regulations in force at that time.