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Pensioners scramble to do the sums as new assets test looms

​I have searched for pension information online but being most unmathematical, find it impossible to calculate the information I need. I have $330,000 in accounts and receive a fortnightly part pension of $647. I do not have money in super. I wish to know how much of my pension I could lose next year and what amount I should have for the pension to remain at $647. L.N.

I guesstimate the assets test is measuring your total assets, including personal items such as a car, caravan and household items at about $363,000. From January 1, an identical amount of assets will grant a single homeowner an age pension of $540 a fortnight.

For your pension to remain at $647 a fortnight, the assets test would need to measure some $326,000. You can gift $10,000 between now and January 1, and you can renovate your home, if it needs it, but I would advise against needlessly reducing your assets. If your assets decrease as time passes, the age pension will increase. It remains one of the better safety nets for elderly people in the world.

Much has been written about the effect of the new rules for pensioners who are assessed on assets but very little has been written about those, like myself, who are currently assessed on income. In our case, my Comsuper pension plus other investments, means we are currently income assessed for part age pension. But I have calculated that as from January 1 the lowered asset threshold will "convert" us to being asset assessed. For example, if current assessable income is $53,000 and assessable assets are about $630,000 will not this result in a lowering of the part pension after January 1? D.C.

From the figures you quote, the current assets test would result in a pension of $822 a fortnight while the income test would grant a pension of some $450 and hence, as you say, your pension is granted under the income test.

From January, the revised assets test would grant a part pension of $557 a fortnight and hence your situation should remain unchanged.

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Regarding the assets test for the age pension in January 2017: For every $1000 over the asset limit you lose $3 per fortnightly pension; $100,000 over and you lose $300 per fortnightly pension, so over 12 months your pension would be reduced by $7800. With $100,000 invested at 5 per cent if you are lucky, the income would be $5000. Therefore the $100,000 is better placed "under the mattress" and be $2800 better off. Am I reading this correctly? J.F.

Mathematically, you are correct if your investments earn 5 per cent but I point out that some of the better diversified funds have outperformed this. For example, the Colonial First State Wholesale Diversified fund achieved a compound return of 9.96 per cent compound over the past five years, although this dropped to 3.58 per cent over the past 12 months. Similarly, the BT Wholesale Active Balanced fund earned 10.75 per cent over five years but 0.8 per cent over the past year. It has not been a good year for investments generally with the share, bond and property markets falling, but markets are cyclical.

Apart from the fact that you might be seen by Centrelink to be depriving yourself of assets, I don't think I'd be able to sleep well with $100,000 under the mattress!

I am 72 and own my home. I have superannuation of $370,000. Other savings and assets total $95,000, and I have been supplementing my part pension with a small income. I am now in a position to do extra part time work that has the potential to let me earn up to $300 per week or more. What is the maximum I could earn under the new rules coming in next year so that I do not lose my access to a part pension? T.H.

Don't forget that, under Centrelink's Work Bonus scheme, the first $250 a fortnight is ignored by the income test. So if you are earning $600 a fortnight, only $350 will count.

The income test is not changing from January and continues to allow up to $1918 a fortnight for a single person ($2936 for couples) before the age pension is phased out completely. From January, the assets test allows a single homeowner to have $542,500 in assets before the pension cuts out.

You should not lose a part age pension if you take the extra work and it should greatly enhance your lifestyle.

I will turn 65 in January 2017 and my wife will be 60 in March. I work full time and earn $100,000 a year. My wife works three days a week, earning $90,000. Health permitting, we both intend to continue this way for a few more years. Our home is valued at $1.2 million and we own it outright. We have about $1.7 million in our self-managed super fund ($500,000 in blue chip Australian shares and the rest in term deposits). Outside of super, we have two residential investment properties valued at $1.5 million and $1.2 million respectively, the latter with a mortgage of $600,000. I understand once I turn 65 I can make tax-free withdrawals from super at will. My questions are: 1. Do I have to take money from super even though I don't require it? 2. The money so withdrawn will not be counted for tax purposes – is this correct? 3. Is there anything else I need to do as far as the super is concerned? R.S.

No, for some years now it has not been compulsory to take a super pension at age 65.

Bear in mind the $1.6 million "transfer balance cap" from July 2017 so that, if your SMSF is not approximately equally divided, you could withdraw cash (since all super benefits become "non-preserved" and accessible at 65) and gift it to your wife who could make a non-concessional contribution into her account.

If you have a large proportion of taxable component, you should also consider a withdrawal and recontribution strategy before June 30 to convert up to $540,000 of your own benefits into tax-free component.

You may find it useful for you to then begin a super pension in order for your SMSF account to become untaxed, noting that you will then have an unsegregated fund (obligatory after July), requiring an actuarial certificate. And, yes, any such pension would be untaxed. 

If you have a question for George Cochrane, send it to Sunday Money, PO Box 3001, Tamarama, NSW, 2026. Helplines: Financial Ombudsman, 1300 780 808; Centrelink pensions, 13 23 00. 

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