I am turning 61 in December. I have a Transition to Retirement (TTR) pension fund of $1.6 million and an accumulation account of $154,000. My wife is 54 and has a super balance of $94,000. In view of the government's cap of $1.6 million on tax-free super, I plan to make all after-tax contributions into my wife's super from now on. As I will still be working for the next few years, and my super balance will increase, can I move my super balance in excess of $1.6 million into my wife's account? E.H.
You should check to see if you have any "unrestricted and non-preserved component" in either of your super accounts. This can be withdrawn and gifted to your wife.
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Similarly, you should start a second TTR pension with your $154,000, then withdraw the maximum 10 per cent from both pension funds, amounting to around $175,000. Your wife can make a non-concessional contribution in 2016-17 of up to $180,000, or more if she wants to use the $540,000 "three year roll-up". But if she uses part but not all of the latter, the cap drops to $100,000 and so does the three-year roll-up, so get advice. Remember she, not you, must make the contributions as non-concessional contributions are a personal contribution.
But first check with your wife to make sure she loves you.
I am unable to keep up with the government legislation at present. I have a super fund of which $160,000 is "non-concessional". Total balance is $250,000. I wish to top it up to the $500,000 this year. I turn 75 on December 15, 2016. I am able to satisfy the work test. 1. Am I able to bring three years forward? No non-concessional contributions have been put into the account for seven years. It has been in pension mode for the whole seven years. 2. Is it possible to place the funds into super any time during 2016-2017 tax time, or is it governed by my birth date? N.G.
Your non-concessional contributions of $160,000 into the fund have formed $160,000 in tax-free component within the fund. It's a fixed dollar amount. The balance, roughly $90,000 but changing every day while the fund is in accumulation phase, is taxable component.
If you were to start a pension, that ratio of 64 per cent tax-free to 36 per cent taxable becomes fixed for the life of the pension. If you were to fall off your perch, the taxable component would be taxed 15 per cent, currently some $13,500.
Once you turn 75, you can no longer make contributions. So, before turning 75 on the 15th, and assuming you have a tax liability, ensure that you have made your deductible concessional contribution (up to $35,000) for the year.
Being over 65, you cannot use the "three year bring forward rule" which means that, before the 15th, you can also make a further non-concessional contribution of $180,000.
However, remember that (a) tax-free component is never taxed when withdrawn from your super fund, even after death, and (b) once mixed with taxable component, cannot be separated. So place your $180,000 into a new super fund, which will initially have a structure of 100 per cent tax-free component and, when withdrawing money, draw from your current fund first, with its potential tax liability.
I am a single woman with no dependants. On retirement, I invested my super in an account-based industry pension fund and lost thousands. I'm worried about what's left of my pension fund, approximately $145,000. I'm not happy with the performance of my fund and was thinking of transferring to another. A financial officer at Centrelink advised that, because I was in receipt of the full pension, I could roll funds over to another account-based industry pension without running foul of the new deeming rules which come into effect in January 2017. The officer also advised another option open to me – roll the funds into an account in one of the Big Four banks. Because the sum total I have is lower than $250,000, my funds would be protected in the event of another market crash. I wasn't expecting this option and it rather threw me! The officer also said not to get a lump sum – to draw down when needed – as a line of credit (I'm not sure now what this means). What would be the best kind of account I should open with one of the Big Four banks, where I could earn some interest, without attracting large fees? L.W.
You've thrown me too! Either there has been a misunderstanding or what you've been told is inaccurate. I suspect the former.
Super funds don't offer a line of credit. Also, the Centrelink changes planned for January 2017 relate to the assets test and none relate to deeming. That occurred back in January 2015, after which new account-based pensions became subject to deeming while existing ones, such as yours, are "grandfathered" i.e. continue to be measured differently by the Centrelink income test. For your pre-2015 pension, the income test ignores a "deductible amount" calculated by dividing your initial purchase price by your life expectancy at the time i.e. the return of your own capital over your lifetime is ignored.
This older test is considered more "pension friendly" than subjecting the pension to deeming, which is what will happen if you rollover to a new pension.
Also, the only superannuation accounts that fall under the government guarantee on a customer's first $250,000 in deposits are "Retirement Savings Accounts" which are offered by with eight small banks and credit unions while the CBA is the only one of the Big Four banks that offers one. It pays 1.15 per cent on $50,000 or more, so I don't find RSAs currently attractive.
Before moving your benefits, determine whether your money is invested in the right investment option; for example, balanced or diversified, and not cash, the latter being an option that some people have chosen since the global financial crisis, to their detriment. If you still want to move, first check whether it will result in your age pension being reduced.
I am a single, unit owner with an age pension of $865 per fortnight. I have 682 CBA shares, a term deposit of $33,266.21, and $91,453 in the bank. I am 89, health is A1, as is family support, but unable to help financially. I'm worried if I have a stroke etc, could I afford a nursing home, and will my pension be affected after January 1, 2017? D.B.
With some $179,000 in "financial assets", your age pension is being determined by the income test and you should see no change from January 1.
Regarding aged care, I always advise people to do their research while they are healthy. Get younger family members to dig up a list of nearby aged-care facilities from the internet and then visit a few, asking about fees, noting these change every six months. You will need to sell your unit but should easily find a suitable place when the time comes.
I am an 81-year-old widow, a non-homeowner with $592,000 in assets and currently receive $521 per fortnight in aged pension. What will my payment be after January 1, 2017. C.B.
I estimate that your pension will drop to $451 fortnight. You can top it up to your previous figure with $35 a week from savings. As your savings reduce, the pension climbs again.
If you have a question for George Cochrane, send it to Sunday Money, PO Box 3001, Tamarama, NSW, 2026. Questions will not be answered until the new year. Helplines: Financial Ombudsman, 1300 780 808; Centrelink pensions, 13 23 00.