16th Apr 2013
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How much Age Pension will we lose?
How much Age Pension will we lose?

YOURLifeChoices members George and Sue are looking ahead to when they qualify for the Age Pension and would like to know how much they may lose by having an overseas pension.

Q. George
My wife and I were born in the UK and both worked there for approximately 17 years each. We think we will be entitled to a half UK pension of approximately 50 pounds each and my wife is entitled to hers this year as she is 61. We realise we will have to declare it for tax purposes. She does still work here fulltime.

We have both worked here since our arrival in 1983 and so will be entitled to full Age Pensions when we reach the qualifying age. I am 60. Here are our questions.

Our understanding is our UK pensions will reduce our Australian Pensions at a rate of 50 per cent in the dollar e.g. if our UK pension converts to $150 a week then our Australian Age Pension will be reduced $75 a week, is that correct?

Now the big question. We will have a combined lump sum pension of approx. $500k, I am led to believe if we roll it into some sort of allocated pension we can draw down on that and keep some of our Australian pension.

Our intention is to try and maintain a weekly income of $1000, and draw out lump sums for ticket items; holidays, cars, medicals etc. So the question is, how is the Australian Age Pension affected by an allocated pension, assuming we fall inside all the asset tests?

We are just trying to get all in order for the big day but realise rules keep changing.

A. This advice is general only and you will need to confirm your details with Centrelink.

Centrelink will assess your UK pension as income and if this takes you over the income limit, your pension will be reduced by 50 cents for every dollar you exceed the limit. For example, the current limit for couples combined is $268 per fortnight. If your income, including your UK pension, is $2000 per fortnight, the first $268 will not be assessed. The remaining $1732 will reduce your pension by $866 per fortnight. Therefore, based on a couples combined full Age Pension of $1218.80, you would receive $352.80 per fortnight. These figures are for guidance only, and are based on the current limits, which you can view by visiting Income test limits for pensions

In regards to your superannuation lump sum, how this income is assessed depends on the type of product you choose. You can find out more by visiting Humanservices.gov.au

This is only a guide to what you may be entitled to. You can make an appointment to speak to a Centrelink Financial Information Services Officer on 132300. This is a free service, which you can access at any time, whether a customer of Centrelink or not, and will help you to better understand your entitlements based on your individual financial position.



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    COMMENTS

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    adbob
    23rd Apr 2013
    2:15pm
    " I am led to believe if we roll it into some sort of allocated pension we can draw down on that and keep some of our Australian pension."

    I think that may be out-of-date information. When Costello "simplified" the super system he got rid of the last of the assets test exemptions.

    The assets test will apply to your $500,000 - if you have about $20,000 in other assets that will give you an excess over the $273,000 threshold (if you're a homeowning couple) of about $250,000. Each $1,000 over that reduces your fortnightly age pension by $1.50 so that means a reduction of $375 pf - however the good news is that only the worst of the two reductions is applied - not both - so in your case that's the income one.

    You need to keep an eye on both.

    Your question wasn't really answered. You prolly need to investigate the rules for "account based pensions". The residual balance is applied to the assets test but I don't know how it affects the income test. There is an income tax benefit with them but you would probably not be liable anyway. Always check though.
    Grateful
    23rd Apr 2013
    3:01pm
    Sounds like another one of those that want to retire with a $500K lump sum, draw down $1,000 per week and still die with $500K in their estate.!! Unbelievable.
    In 6 years time when hubby is "eligible" note, not "entitled" there will be completely different rules, especially if Abbott and Hockey are running the show, and all of this will be hypothetical anyway.
    But, why not just keep building up your super to around that $500K level, by then the interest rates will probably be back to around 6-7% for term deposits. That will give you a return of around $35,000 p.a. combined, or, $700 p.w. plus your U.K. pensions of around $150 p.w., making a total of $850 p.w. if the new tax scales are not altered by the new government, that should all be tax free without any sophisticated accounting gymnastics. Again, under this government's arrangement, you would get that extra $150 p.w. from the Aus Age pension. Failing which, what's the problem with some draw down on the T.D.?
    Yes, go and see Centrelink. They provide an excellent financial advisory service and will tell you how you will get the maximum amount that you are "eligible' for, again, not "entitled" to get. But, don't let this dominate your life for the next 6 years, live for today and then enjoy what you have. With those numbers, it sounds like you have absolutely nothing to worry about financially, but the worry of it itself.
    Shorty
    23rd Apr 2013
    8:48pm
    Firstly income from non-superannuation investments is deemed by Centrelink so just because you earn $2000 income does not mean that is the value of that income for Age Pension purposes. Use the rules to make the most of your capital.

    Secondly, income from a Account Based Pension is treated concessionally under the Income Test (due to a deductible amount reflecting some of the pension is a return of your own capital) so a $2000 pension may not reduce your Age Pension by as much as indicated above.

    Use the Centrelink FIS officers to get an indication of your Age Pension, then see an advisor about putting strategies in place to maximise your benefits.

    If you plan on visiting the UK on holidays, think about leaving UK pension payments in a Sterling account rather than incurring exchange costs or build them up and move in larger amounts to minimise costs.
    Grateful
    24th Apr 2013
    7:24am
    When are we going to stop seeing "USE the rules" "USE the Centrelink FIS officers" "maximise YOUR benefits". Pensions are for the NEEDY, they are a financial "aid" and the sooner we stop treating them as a financial "tool" the better off we will all be. We are becoming a most selfish and greedy country and only have to see what is happening in Europe to learn a harsh lesson.
    Grateful
    24th Apr 2013
    8:25am
    How great it would be if, instead of "how do I maximize my benefit", we started hearing "how do I minimize my need for a benefit"??
    adbob
    24th Apr 2013
    1:49pm
    @shorty - what you describe is correct but I'd hardly describe it as a "concession" (the terminology used by both the govt and the super funds) to withdraw some capital so that you can spend it. It's only the equivalent of withdrawing some money from a deposit account.
    Grateful
    24th Apr 2013
    7:18am
    George. Sadly, you are like far too many people who say that they are "entitled" to receive a Centrelink pension in Australia. You may be "entitled" under the U.K. system, but in Australia, you have to be "eligible". It is not a god given gift.
    Our pensions were designed to "support" the "needy" and if I can be so unkind, do you honestly think that having half a million dollars and probably living in an equivalent valued home,that you NEED to be supported by the Australian tax payers after they have already heavily subsidized your accumulated superannuation fund with those incredibly generous tax concessions?
    Do you think that it is reasonable to expect the Australian taxpayer to subsidize your $1,000 per week lifestyle?? Especially while those really needy age and disabled pensioners who have nothing and are trying to survive, exist, on $400 per week and very many of those have to pay over 50% of that in rent!!
    If any government wants to look at how to save money, that is the first area that they should look at, far too generous tax concessions for superannuation and far far too generous income and assets tests for pension eligibility.
    George, you are in a most fortunate position that most age and disabled pensioners would envy, so, why don't you be grateful for what you already have and not worry about how much more you can get out of the Australian taxpayer and thank God that you will not have to rely on any pension to enjoy a most comfortable lifestyle. Leave the pensions to those less fortunate who really NEED help.
    I'll bet that by the time you are 66 any answer that you get today will be totally obsolete!!
    boy'o
    25th Apr 2013
    7:25pm
    What ever way you look at it I still call it a MEANS TEST.
    Like the rest of us getting a UK pension be glad that you still can, considering the global market.


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