Using super to pay out mortgage

Could Jenny use her super to pay out her mortgage and still get an Age Pension?

Using super to pay out mortgage

Jenny is considering retiring, but she would like to know if she could use her super to clear the balance on her mortgage and still get an Age Pension.

Q. Jenny
I have a question for you and I hope you can help me. I'm 65 and would like to retire. I have only $95,000 in my super account and no other assets other than a house which has $70,000 still owing to the bank. It is an old house and needs a lot of repairs. Upon my retirement I intend to use this money as a lump sum to pay off my house so I don’t have this burden over my head. Can I do this and, if so, how will it affect my government Age Pension? Someone just told me that Centrelink would not give me any pension if I do this. If this is true, I don’t know what to do anymore.

A. Provided by Human Services
The balance of a superannuation fund is assessed as a financial asset unless the customer is under Age Pension age, in which case it is not assessed. The net value of their home is not included in their asset test calculation, provided the home is not used for business purposes or is on land that exceeds two hectares. So, the amount of the outstanding mortgage is immaterial.

If funds are withdrawn from a superannuation fund prior to claiming a payment, this will only affect future payments if they are gifted to another person. Otherwise your claim will be assessed using the balance of the superannuation fund, in the instance where the claim is made after Age Pension age has been reached, and other assets at the time.

If a current customer, who is under Age Pension age, draws on their superannuation fund, this realised amount will normally be assessed. But if it is used to pay off their mortgage or improve the value of their house, both the assessed values of the fund and the house will remain as nil and the rate paid to the customer will not change. If a current pensioner, who is already Age Pension age draws on their superannuation fund to pay off their mortgage or improve the value of their house, the assessed value of the fund would be less, as would the total assessed value of all their assets.

Transferring superannuation funds to pay off a mortgage may be financially advantageous for some customers, especially those over Age Pension age who are income or asset tested. However, we suggest that customers contact the department to discuss their personal circumstances.

Please consider contacting the Department of Human Services on 13 2300 to discuss your circumstances.





    COMMENTS

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    MICK
    5th Sep 2014
    10:06am
    I'm glad I did the right thing.
    Don't expect this out to continue under this government which is looking at every one to tax average Australians it can find. Superannuation is already under the microscope and both sides of politics see superannuation as a honey pot they should be able to take from. It will happen. Give it time.
    Personally I thought that the Labor scheme whereby superannuation accounts earning over $100 000 pa paid tax was fair enough, but of course this government, owned by the rich, would have no part of that. So they came after average Australians with all the lies at their disposal. I have to say it has worked for them because Australians have been easily conned.
    Kopernicus
    5th Sep 2014
    10:18am
    Could not agree more, Mick. Bulls eye.
    particolor
    5th Sep 2014
    10:58am
    "EEEY Me Hearties !! Lets be havin Yee Treasure !!"
    Long John Abbott.......
    MICK
    5th Sep 2014
    11:01am
    particolor: So do you think that Australians are bright enough to wake up to the fact that they are being slowly cooked? Or do you think that what I hear from some (the budget hole, the bad Carbon Tax and the bad Mining Tax) is again going to prevail over the truth? I'm not so sure.
    Kato
    5th Sep 2014
    11:34am
    The goose has been well done.
    niemakawa
    5th Sep 2014
    1:50pm
    Superannuation ( forced) will undoubtedly be raided by the funds themselves and all Government alike. Those now under 50, whose eligible retirement age will be 70, will have to survive on the income stream from their accumulated superannuation. Come 2035 and more than likely before, lump sum withdrawals will be a thing of the past. In reality those that have "saved" for their retirement will be penalised year in year out and what will be left ( income streamed) at retirement will probably be little above the "government" pension which will be doled out to those that were unable or not willing to put money into a Super. fund. This is what is called wealth redistribution.
    MICK
    5th Sep 2014
    4:10pm
    A couple of modifications to a good post niemakawa.
    First is that workers will have to contribute. No choice. Second is that, like now, superannuation will not be more than the pension. Well only for the rich for whom the legislation is made....so that they can squirrel away truckloads of money, get a tax deduction and then have a wonderful life when they retire. The only fly in the ointment is that they will have to wait until they are 70.
    Also, expect the balance of superannuation accounts in the future to default to governments, not family.
    particolor
    5th Sep 2014
    5:46pm
    Mick.. I had a web Site suddenly Appear in My Email this morning !! Its Great Reading !! The site is called.. Buzz Feed Community.. And todays Episode was ...15 of Tony Abbotts Sell offs since the Election, and the Environment Back downs !! Not much Left !!
    Adrianus
    7th Sep 2014
    7:53am
    You people seem to think superannuation is the only way to accumulate some wealth for retirement. Fund managers, Unions, Governments of left and right (including State Governments), Financial advisors, Banks, are all getting a slice of the action and milking it madly. Superannuation has been gradually pilfered over the years by interested groups to the point that it has become somebody elses play money.
    buby
    7th Sep 2014
    7:23pm
    what you talking about mick, they have had their fingers in the honey pot ever since the Super business started lol?
    Kathleen
    5th Sep 2014
    12:22pm
    I commented on a thread on Facebook that basically all LNP supporters and my comments were wiped. One was just supporting another lady who made good comments about Labor and opposite to the ones that were calling Abbott a legend! There were 1000 likes and 800 overly sickly comments to support the government so here's hoping this mob are here to stay for a while. The rich will get richer and the poor will get poorer....the Liberal way!
    MICK
    5th Sep 2014
    12:28pm
    From personal experience most media outlets refuse to print ANYTHING which shines light on what this government has done, how it came to office and what it proposes to do in the future. Usually all you get is attacks on Labor and a blind eye when it comes to reporting the truth.
    Good for you that you believe Abbott is a legend. Your last sentence says it all.
    Pardelope
    5th Sep 2014
    4:43pm
    Which Facebook page - the LNP one?
    Kathleen
    5th Sep 2014
    12:23pm
    Correction...hope they are NOT here to stay!
    MICK
    5th Sep 2014
    12:30pm
    ????? Check out the dementia symptoms maybe. Sorry.
    Pass the Ductape
    5th Sep 2014
    12:38pm
    And I thought it just a simple question!
    downunder
    5th Sep 2014
    12:55pm
    Mick you are 100% correct. This government stinks, unless your name is Gina or Twiggy and there are others, in short 'the big end of town'. Why is it not reported? simple 70odd% of the Australian press is connected or owned by Rupert. Read 'The Guardian' and possibly 'The Age' and you'll get a different, more down to the point view. We Mr & Mrs average are just cannon fodder and dumb heads only there to be sucked dry, the faster the better and looking into the future, come next election, well I am not holding my breath, Aussies are to easily being tricked and sold a turkey. I sincerely hope not, but........
    MICK
    5th Sep 2014
    1:51pm
    A pity so many of our countrymen cannot see the forest for the trees. That's why I beg people to vote for a good Independent...and often get cynical comments back about how bad these pollies are, without any comparison to those who are elected.
    I live in hope eterntal though. As they say, every journey starts with the first step.
    Kathleen
    5th Sep 2014
    12:57pm
    I do not believe Abbott is a legend. History will judge that! Plenty of Labor's threads come through my Facebook page too. ABC news threads come through too! I am sad to think that this government is bereft of any social conscience unless they are forced to do something. Liberal supporters seem to be blind to the injustices. Not all are wealthy which also amazes me!
    niemakawa
    5th Sep 2014
    1:55pm
    So you mean everyone should be wealthy?
    niemakawa
    5th Sep 2014
    1:51pm
    Oh!
    Kathleen
    5th Sep 2014
    2:42pm
    Some poor people are supporting the government! Everyone should be able to live a decent life. I am surprised that a pensioner renting and with multiple illnesses would support LNP!
    downunder
    5th Sep 2014
    4:20pm
    So am I, but a lot of older ppl think there perfume smell coming out of his ar***
    niemakawa
    5th Sep 2014
    7:23pm
    It is a personal choice for whom people vote.
    particolor
    5th Sep 2014
    8:09pm
    There was an old Bloke 88 living opposite me here a few years back and He must have grown up like it, a Family Gene !! He was as poor as a Church Mouse and would watch anything Liberal on the telly Drooling ! and in a Trance I think ?
    Anonymous
    7th Sep 2014
    7:10am
    particolor - only a low IQ is required to turn on a telly and drool over a political party.
    adbob
    5th Sep 2014
    2:46pm
    What a lot of self-contradictory waffle (in the original answer. The final para is as good as it gets and still not a direct answer.

    Surely the short answer that for people whose Age Pension is otherwise going to be reduced by the Assets Test - Yes - pay it off.

    For someone with only a small amount of assets, such as the questioner, their Age Pension should not be affected by the Assets Test.

    But if she works and the income from her super pushes her into the income test that would be another reason for paying it off.

    Where there is no Age Pension impact it's a matter of weighing up which gives the best deal. One thing to consider is that if it is a flexible mortgage with redraw provisions it might be worth not paying the whole thing off altogether so that if you run short of cash one day you can redraw some.

    Also consider whether the ongoing bank charges are worth it.

    After all that - do what makes you feel good. It's nice to be debt-free - but don't forget the redraw angle if it's relevant.
    MICK
    5th Sep 2014
    4:13pm
    You are assuming that the family home is not going to be included in the assets test (Abbott has already put that on the agenda) and that the assets test does not reduce (also on the agenda).
    There are other issues as well.
    niemakawa
    5th Sep 2014
    4:29pm
    Mick, undoubtedly the family home or a % of it will be included in the assets test. This will happen regardless of the incumbent Government. The upside, if you can call it that, is that it probably only affect those that are 50 and under. The Government hopes the "surplus" of "oldies" and I include myself, will have gone to greener pastures by then.
    Colours
    5th Sep 2014
    2:48pm
    Contact the Dept of Human Services? Life's too short to get in that queue.
    Pardelope
    5th Sep 2014
    5:09pm
    Yes - and you don't want to talk to just anyone. You need to make an appointment to have a face-to-face talk with one of their "financial advisors".
    downunder
    5th Sep 2014
    6:41pm
    Pardelope, good luck
    Pardelope
    5th Sep 2014
    5:06pm
    Long ago, I learnt that if you climb up the ladder (by fair means or foul) the common next move is to kick the ladder out behind you. Often these people exclaim "if I did it, so can everyone else". It allows them to step over the person in the gutter - and maybe give them a kick along the way.

    If you are in the "wealthy" bracket, you want consumers, tax-payers, workers (slaves) to be at your beck and call. You don't want them asking for "perks" like disability, unemployment, age, housing, medical or other supports if they are unable to provide these for themselves.

    Menzies (who was Lib PM for over twenty years) said that the ideal was 10% unemployed - so workers would be forced to accept whatever conditions and money were offered. In his mind, anyone who was not "productive" was a drain on the economy.

    Many people in Australia are one or two pay packets or Centrelink payments away from the street. They should NOT vote for any party or candidate who thinks this is ok or good.

    Anything aimed at helping those who are less advantaged e.g. widows, the sick, aged, unemployed etc was introduced by Labor. I am VERY concerned that Labor has "lost the plot" and in many ways, and is now virtually indistinguishable from the LNP. Also, it is never good to have one party controlling both Houses - or the majority of States.
    Pardelope
    5th Sep 2014
    5:21pm
    ...a drain on the economy - and an "easy target".

    6th Sep 2014
    7:20am
    I am probably entirely wrong but I thought the original idea of superannuation was to provide for you in your old age and it was not to be touched.

    Dipping into it for whatever reason seems to defeat the purpose of having it I would have thought. I know this is being done with more frequency now.

    Surely it would be more prudent to make sure you pay off your mortgage before you retire?
    Blossom
    6th Sep 2014
    1:03pm
    When I started work women didn't have Super. There is very tight criteria for having funds from super released prior to retirement, One is severe legitimate financial hardship. I know of a person who was forced to do so as he is self employed and is owed thousands by one company he did work for, and is also waiting for a refund from another company which has been ordered by court. Otherwise he would have lost everything he had including his house which is mortgaged too.
    niemakawa
    6th Sep 2014
    1:17pm
    Engy at the moment the preservation age is 55, so unless certain criteria is met, then the trustee of the fund cannot release any monies before reaching the age of 55. Even withdrawing benefits after 55, there are of course tax implications. Also from the age of 60 I believe any withdrawals are tax free. Unfortunately all Governments keep tampering with superannuation, taxes, personal contributions, salary sacrifice, just to name a few. The system does not bode well for those who have many years of working life ahead of them. How can they have any faith in it and not knowing if they will have enough money on which to retire comfortably!
    buby
    7th Sep 2014
    7:15pm
    Radish if the government can dip into it why can't the person whose super it is use it when they are in desperate need.
    I mean you start a super, they glorify it, and say they will put in as well. then once started down the track they dip into it, by way of a tax. Me thinks thats their way of getting you started and saying they will put in. but they don't tell you they will be taking some out down the line. very Weird, YOU would be better off paying off ya mortgage, and using that as your fund. Its certainly a lot safer then the funds investing it. YOU could lose it on an economic downturn anyway, when the world goes into recession. Because Politicians can't manage their countries money. Look at greece!
    Blossom
    6th Sep 2014
    12:55pm
    Relatives of mine regularly receive update forms from Centrelink to fill in. They are allowed one car which is not included in their assets yet they have to state its value. Are they supposed to find out how much it is worth regularly??
    AngryAussie
    7th Sep 2014
    7:46am
    One of the most important aspects of gaining access to super BEFORE retirement is that the Govt will tax you 21% ..... I fell behind with my mortgage after a car accident involving a drunk driver ..... only way i could keep my home was to pull money from super. APRA has to approve this on 'Compassionate grounds" ..... I had to inlide 21% for the govt and the money went straight to Suncorp ..... I never saw a cent.
    Incredibly compassionate wouldnt you say ?
    Mary
    8th Sep 2014
    2:31pm
    This was a perfectly legitimate question - why oh why must it be hijacked with people oushing their political views - join a blog about politics and allow the sensible people to answer this very important subject
    Boomer
    5th Feb 2015
    7:12pm
    Super is supposed to be used to fund your own retirement instead of claiming a pension butinstead there is currently no accountability. Everyone over 55 at present can say they are retiring, take all their super, spend it all and then put their hand out for a pension once they turn 65. Please try to remember the purpose of super. It's about time the government stopped this and brought in part at least a part compulsory income stream. You may find you are better off and pension payments will be left to the real needy.
    gloria2111
    15th Jul 2017
    12:04pm
    Hi,

    In a word, wow!! I can't believe the funds are in my account already. Thank you, thank you, thank you! You made what is usually a long, drawn out and intimidating chore into a very pleasant and streamlined experience, and you for the wonderful service. You are both quite awesome! if you need an urgent loan you can reach them on there email johnsmithloanhome@live.com


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