Superannuation and the Age Pension

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Frank has a few questions on how his superannuation might affect his Age Pension. Several factors need to be considered first.

Q. Frank

Does a pension from superannuation count as an income? How much per month can we draw down from superannuation if we are on an Age Pension?

A. Whether your pension from your superannuation is assessed as income or not depends on the type of income stream you have purchased, when it commenced and your age. To confirm your personal situation, you will need to contact Centrelink or seek advice from a financial advisor. You can also find out more from Humanservices.gov.au

Certain products also require you to withdraw a certain percentage of your account balance (determined by your age) each year, which can be taken monthly, quarterly, half-yearly or annually. You can find details of these percentages from Moneysmart.gov.au.

How much you can draw down from your pension each month if you are on an Age pension will depend on the other income you receive. You can view the current income thresholds here

It is also worth noting that your Age Pension payment will be assessed under both the asset and income test, and you will be paid the lower amount of the two calculations.

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Written by Debbie McTaggart

33 Comments

Total Comments: 33
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    Debbie. Don’t forget to warn readers also that whatever the rules are today, the Govt of the day might change them tomorrow and pull the rug from under you, just they way they have done with those part age pensions adversely affected by the changes to the assets tests on/from 1.1.17, especially after the govt promised at the last election that they would MAKE NO CHANGES TO PENSIONS. What a bunch of liars they are, and then commit such an act of treachery.

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      thommo – I agree with your comments

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      Usually an election promise would be accepted by a reasonable person as being for the term of that Government. Would all of the bitterness about treachery and broken promises and liars be made if the pensions had been announced to increase on 1.1.17? On the other hand, would you now prefer that there was never another change made to pensions, up or down, because of a promise made before one election?

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      The normal LNP response Sceptic or Frank or whoever. You may be correct about the term of the promise but it is only basic honesty that on being asked to be re-elected that the position be stated. Forget about the current government having the basic honesty to do this. It will say anything to be elected and then turn around and do what it wants. That is why it will not be re-elected….even if Rupert Murdoch and his propaganda machine go into overdrive again.

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      Spot on, thommo – we need, right yesterday – to derive a solid base on which pension/superannuation will be handled – and that base must be set in solid iron so future governments can’t wreck it for some or many.

      we all know by now that Pension is a bought and paid for Entitlement derived from income tax of any family unit over fifty years of working with zero tax concessions – and that superannuation, on the other hand, accepts either two or three tax concessions along the way, and is thus actually less ‘their’ money than the pension is to a pure pensioner or part pensioner.

      A direct change needs to be done immediately so as to ensure that fully paid up Pension is not included in any taxable income – a double whammy for the working pensioner.

      That leads us to the question of – taking into account that super has already accepted several tax concessions – whether or not everyone should be paid a tax free pension derived from income tax over working life, and then all income above that be taxable.

      That’s one suggestion.

      Another is that pensioners who work should pay the same tax on all income as super recipients do…. and a level should be set at which tax begins to become payable for all equally.

      On top of that, there is a need to limit super so it does not become the tax haven for the rich that is has become, by making a solid affirmation that only a specified amount is permitted to be salted away, and after that it is all treated as savings.

      Either that or simply create a single pool of both income tax portion dedicated to retirement AND super, and pay a minimum to all and an extra allotment based on level of contribution above a certain level – but with the same upper level restriction so that this measure only impinges on those who are either to receive a pension or are substituting for pension plus a little extra to a specified limit.

      Again the same rule of tax above a certain level would apply to all – but pension pure and simple would no longer be a taxable item when a pensioner has the damned gall to actually work…. (I do and it gets right up my nose!)….

      I reckon one or some combination of the above would resolve the issues – provided it was set solid and out of the hands of grasping politicians and their running dogs and controlled by an open and accountable body that included community representatives.

      (Little Ol’ Commie Me? I doubt it…. just seeking right for all and equal treatment for all.. and not before time)

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      Idly wondering if those unfairly hurt by a broken election promise on pensions might have a compensation claim against the Government for misleading and deceptive conduct? Apparently Dutch citizens have just won a case against their government over climate change, so unexpected outcomes are possible it seems! Thousands of part pensioners have had their retirement plans totally demolished by a broken promise after decades of careful planning in accordance with government recommendations and advice. Many of those hurt now have no recourse and will suffer heavy loss, and I would venture to suggest that many can evidence that the Government’s claims (attempting to justify its actions) are false and the change is grossly unfair.

      I appreciate the need for change to remedy budget problems, and I totally support fair and equitable reform. But the emotive claims of stopping ”millionaires getting pensions” are based in the politics of envy and not on researched fact. The reality is that many of those affected are being dealt a very unfair blow that will cause them grave hardship and that renders them far worse off financially than many who will enjoy pension increases.

      Current pension means tests are fundamentally unfair. An independent global authority has declared that the Australian aged pension system currently rates a poor 3.3 out of 10 for fairness, and the change to the taper rate and assets threshold will make it 3% LESS fair, reducing the score to 3.

      It’s all too easy to declare that pensions should be paid only to those in genuine need, but that argument ignores major issues of circumstance and entitlement. For example, the current system greatly favors anyone who can continue to earn income in retirement – especially if their assets are limited. A retiree can continue to receive a generous pension while earning a substantial income from work AND receiving huge dividends from modest investments. The dividends, in such cases, hardly reduce pension entitlements at all because they are ”deemed” at 3.25% (regardless of actual return) and only half of that amount is counted. Conversely, another retiree who potentially suffers disability or illness that drives their living expenses very high is slugged with an effective deeming rate of nearly 8% and all of that assumed return counted if they have only marginally more savings than the high income earner and $0 in income.

      It is also often assumed that only the privileged have a higher level of assets, but that ignores the facts also. Many seriously under-privileged acquired assets through major sacrifice or working extensive overtime and multiple jobs – saving BECAUSE they were disadvantaged and determined to work and save their way up to a higher living standard. How is it fair to strip them of the benefits of their work and sacrifice while rewarding those who didn’t work as hard and lived a more lavish lifestyle, spending freely?

      People with disabilities may have higher assets because they received a compensation payment after an accident, or because a relative sought to ensure their financial security. While it may be fair to suggest that a compensation payment should substitute for pension payments, often the net receipt of compensation is not sufficient to cover the extra living and medical expenses incurred as a consequence of the disability, but the change to the assets test forces these retirees to use their compensation payment to cover basic living expenses and leaves them with nothing to cover the extra living and medical costs the compensation payment was intended to address.

      Merely having some savings doesn’t render a person either privileged or affluent, and to declare that someone who has savings has less entitlement to retirement benefits than someone who spent their income freely, regardless of current circumstance, can never be deemed fair by any reasonable person. To declare that someone must live off their savings until they nearly run out, regardless of income, capacity, health, and circumstance, is grossly unfair and viciously cruel.

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      If people don’t like the “proposed” changes (not due to come in until after this term of office finishes) vote them out.

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      They are no longer ”proposed” Radish. The legislation has been passed. It doesn’t come into effect until the next election, but it has been legislated. Will be interesting to see if Labor is willing to reverse it. I still maintain the legality is questionable given that people based their financial plans on Government advice, and this Government was elected on a pledge NOT to make changes.

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      I don’t see where the lie is thommo?

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    With all due respect Debbie, I find these types of answers to questions just so unhelpful. I know you can’t give specific advice for individual cases, but some examples of how things work would be much more helpful rather than just referring “Frank” to links on government websites as they are very confusing. Some general types of examples would be most helpful, eg if a couple own their own home, have say $600,00 in super and no other assets, what will they be entitled to from 1/1/17 compared to what they would get now.

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      I read the article and thought …. What does all this really mean??? I checked the links and I was even more confused. I agree with Debbie.

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      I agree totally with DebbieP. The question was quite a simple one but obviously Your Life Choices isn’t in the business of offering common sense advice for free. I’ve noticed this in many other cases – with a bent to steering people towards obtaining advice from financial advisors – which seems to be the main aim of Your Life Choices. In other words the site simply appears to be a conduit for obtaining business for financial advisors.

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      With respect, for this site to continue it needs to make money somehow. I’m ok with this, because it is commercial and political reality. For any business the challenge is to constantly exceed customer expectations in order to grow. Many small businesses, possibly as many as 75% prefer not to grow, but a distribution business must have this desire to grow in order to succeed. What I find unedifying is the constant postings of politicians like mick, Rainey and Jen.

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      Excellent points, Debbie P! My partner’s disability pension will be reduced by 20 % in January 2016 – $80 per fortnight! My modest superannuation pension will be reduced by $24 per fortnight. What a mean-spirited federal government we have in Australia. I will do what I can to encourage people to vote this mob out! All they have done is to increase the cost of living for most Australians.

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    thommo , your comment is illinformed and simply indicates the colour of your politics . The system is and has been for years unfair to new pensioners in that many older pensioners have their assets invested in exempt investment products that are no longer available to new pensioners .Whereas the current asset and income test is regularilly adjusted by the government of the day and applies to all pensioners .

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      Torch….regardless what political party is in ……….TRUST NO OF THE BUGGERS FULL STOP……….

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      Many part age pensioners made the irreversible decision to retire based on current rules and regulations, but then the govt pulled the rug from under them. The Govt should have done the right thing and ‘”grandfathered” the current recipients, but that would be the fair thing to do wouldn’t it. For the sake of a few lousy dollars in the short term, this govt has ratted on it’s own retirees. Expect a shake-up at the next election.

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      I have no colour to my politics Torch because I support neither side and I realise that both sides of politics are corrupt, with the current government being the worst in living memory.
      I’ll back thommo in this one. He is correct! This lot came in on PROMISES which they abandoned as soon as the election result was announced. A liar is a liar is a liar. When do leopards ever change their spots!!

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      Torch. You miss the point. Good changes are welcomed, but these changes are seriously detrimental to several hundred thousand part age pensioners. The changes are simply grossly unfair The Govt doesn’t get any brownie points for detrimental changes – instead they will kicked out of office come next election.

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      Anything to support your corruption charges mick?

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      Thanks for shining some light on that point Torch!
      That is why I like this government’s stance on “no changes to superannuation.”

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    Dont get angry, get even, election not too far away, cannot wait to hear what the Libs are promising next!!

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      We all wait for the sweetener. Wonder if they’ll go after the working mothers’ vote again.

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      Be a nice little raise for the pensioner.. might even be a dollar in it for the unemployed… women of course will still require massive input to get into work and keep them in work and education even when they are the higher number of graduates etc (all bulldust).. working mothers… now there’s a beauty….Families will need a little kick to make up for the torture of the first Budget and its lies… jeez – if we play our cards right we might even get back the Medicare refund in full… but it’s too late with the scare campaign having worked on doctors who now will not bulk bill here… thanks for nothing Joe-Boy…

      Yup – got a few things to put to my local member…..

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      Dump these bloody lying LNP mongrels! Remember what Abbott said……no cuts to pensions, no cuts to Medicare, no cuts to the ABC and SBS…..all broken!

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    I guess retirees who, during their working life, have paid their fair share of taxes and saved their money for their retirement are easier targets for this government to put the screws on, tather than getting big corporations to pay their fair share of tax!

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    Debbie……not a very informative write/article!!!
    Disappointed in the lack of comment about the GREENS selling out the Pensioners to allow this unfair legislation.
    All Labor has to do get back in is Promise to REVERSE all Legislation with regard to Pensioner attacks by the Liberals, REVERSE the funding cuts to the ABC & SBS but best of all…….Review all changes made to the Superannuation Funds with regard to tax payer subsides beyond a reasonable level FOR ALL!!!!
    But the vote winner would be to STOP muli-national Companies from avoiding paying a Minimum of 20% tax by putting the ATO in charge of issuing the Australian ABN Number….
    o 20% paid….removal of ABN Number and ability to trade within Australia!!!

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      I would like to agree, Not Senile Yet, but I fear Labor might have to find a more popular leader to avoid losing the un-losable. I don’t think Shorten is going to lead them to victory regardless of promises.

      On the issue of pensions, I began to idly wonder, this morning, if those affected might have a valid compensation claim against the Government for misleading and deceptive conduct causing financial loss? Thousands of part pensioners made their retirement plans based on government advice and urging to save, and pledges of certain entitlements in retirement. Many of those part pensioners are now seriously hurt, and in many cases very unfairly and with false claims by way of attempted justification, by the breaking of an electoral promise that was made to attract votes. Surely the government has a case to answer? Dutch citizens have apparently just won a law suit against their government over climate change. I wonder what result a class action over unfair pension changes would yield?

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    I agree mwith Diamond Jim, get rid of them all, and cut there rorting out too.

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      Complete change of government style to one of the people, for the people, and by the people – with extreme accountability. You’re talking my language there, Tomaso.

      It’s not just the parties we need to set straight, – it’s the entire protective cushioned system that encourages them to their excesses. How can anyone living off the fat of the land have any idea of how to generate policy for the rest?

  8. 0
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    I note no changes to the Australian citizens employees (MPs) for life time payments received by them and other perks after they have completed their employment as MP and left the Australian citizens parliament.

    I should have taken up the Australian citizens occupation as a member of parliament for about 10 years hence would have no pension ,trips or other monies problimes

  9. 0
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    any one who can post here the very liberal pay packets,pension and perqs and are the terma same as those apply to other citizens.For what considerations,monetary or otherwise for them to side with Bull enfocing the changes from a day after?Oldies those are affected by these changes can turn the table on these baffons (who so act) in the “so called parliaments” wasting money which can go to deprived class.


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