I am 60 and my wife is 59. I am thinking about retiring in the next year or two. We are debt free and own our home and we are in good health. I work full time earning $76,000 a year and am a member of two super funds. SASS is a defined benefit scheme with $577,000, into which I contribute 1 per cent of my salary fortnightly. The other is First State with $200,000, into which I salary sacrifice $100 fortnightly. We also have $180,000 in direct shares, $90,000 over three managed funds, $30,000 in the bank and one year of accumulated long service leave. We are unsophisticated when it comes to managing money and how to set up our finances when I retire. One instance of this is the SASS pension option that is available to us – of the $577,000 we can take a part lump sum and leave $307,000 and receive a pension of $916 a fortnight for the rest of my life. If my wife survives me she will be paid 66 per cent of the $916 until she dies. We have two sons aged 30 and 28, who are paying off their own mortgages. When the time comes to retire should we sign up for the SASS pension and run the risk of getting run over by a bus on the way home or should we draw out everything and roll it into one and get paid an amount to live on? G.S.
The pension you get for life for your purchase price of $307,000 is very generous and considerably higher than any annuity you could buy with the same money. I would certainly take the pension, unless you and your wife both fear health problems have considerably shortened your life expectancy.
Just be careful when crossing the street!
I received an inheritance in cash from my mother and I am on Newstart. I used some of it to pay off my home and have invested the rest in a family trust, with a corporate trustee, of whom I am the director and one of the beneficiaries. My two daughters, 16 and 19, are the other two beneficiaries. Both are in study, the elder has a part-time income. The money is a normal savings account with no great interest to think of. When I draw on the funds in the trust to use them for something, do I have to declare that to Centrelink? Being in the trust are they still considered to be inheritance funds? I know I have to declare any income I make from it, but the capital itself? I have never advised Centrelink of the inheritance to date, since March 2016. N.W.
Yes, you should have declared the inheritance and the trust to Centrelink. Since you will be deemed to control a private company or private trust, those assets and income will be treated as yours.
You will probably need to repay what Centrelink calculates to be overpayments.
My wife and I are retired and were previously entitled to a part-pension that ceased on January 1, due to exceeding the asset limit. My wife has an annuity of $50,000 and cash of $100,000. I have cash of $320,000, term deposit of $75,000 and Australian shares worth $200,000. We have an self-managed super fund with $200,000, which is currently all in cash. Is it possible to transfer personally held shares into the fund without going through the normal buy/sell requirements? If not (I understand cash cannot be transferred) and with most of the assets outside the super fund is the fund worth retaining? Account costs for Tax Office requirements are expensive. I was planning to invest the SMSF into a listed investment company or a managed fund but now query the wisdom in retaining the fund at all. J.H.
Being over age pension age (that is, over 65) and retired, you are unable to make contributions into a super fund. A transfer of shares into your super account is seen as a contribution and thus not possible. If your wife is under 65, you may be able to transfer shares into her super account, in which case you can do so using a standard transfer form from the share registrars of each company. Be keenly aware that such a transfer triggers a capital gain or loss.
Alternatively, your super fund can buy the shares from you at the ASX closing price on the day, and, again, you can transfer using the standard forms. You can do this at any age because these are purchases, not contributions. Be sure to talk to your accountant.
I see an SMSF as suitable to someone who wants to invest his own money, have a degree of control over it, and enjoy doing so. A fund with $200,000 in it could meet that objective if that is what you want. I find it unusual that you would retain an equally sized share portfolio in your own name but keep your super fund, which is no more than a tax shelter, in cash.
If you have any doubts about wanting to run your super fund, then you probably shouldn't and you might find yourself a lot happier rolling the money over into a public super fund, such as an industry fund or a low-cost wholesale fund, such as Colonial First State's. Then simply wind up the SMSF.
If you have a question for George Cochrane, send it to Sunday Money, PO Box 3001, Tamarama, NSW, 2026. All questions answered. Helplines: Financial Ombudsman, 1300 780 808; Centrelink pensions, 13 23 00.