This retirement trick can help you access or increase your pension

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Say you have had a bumper couple of years, thanks to some wise investments. This windfall could push the value of your assets over the limit for a part Age Pension.

Cashing in the investments and parking the funds elsewhere probably won’t help you avoid the Centrelink razor either, because, wherever your wealth is stashed, it can’t escape an assets test.

Luckily, retirees who have come to rely on a part Age Pension and do not want to sell down the value of their investments do have one handy option – upsizing.

Asset-rich part Age Pensioners approaching the limit beyond which their wealth precludes them from welfare can sell their ‘modest’ homes and liquidate some of their investments. This should help them become sufficiently cashed-up to go hunting for a very lovely home that is worth considerably more than their original one.

As the home you live in is not assessed for the purposes of the Age Pension, it could be worth $300,000 or $3 million. Centrelink couldn’t care less because, at least for now, family homes are not factored into the assets equation.

As the family home is not counted as an asset, it can essentially become a bricks and mortar bank account to be drawn against as needed.

Naturally, the government isn’t keen on retirees being encouraged to buy more valuable homes than the ones they already live in. That perpetuates reliance on welfare by retirees, when what the government is aiming for is to make them become more self-reliant.

That was part of the reasoning behind the government’s downsizing initiative to allow retirees to boost their own superannuation funds through a non-concessional $300,000 contribution after selling their house.

If you do decide to upsize, it is worth keeping in mind that, as a general rule, the transaction costs – such as stamp duty and marketing – can swallow up to 10 per cent of the value of the home you are selling.

Would you ever consider buying a property bigger than the one you already live in? Do you think it is fair that pensioners who live in very expensive homes do not have their family home asset tested?

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Written by Ben

43 Comments

Total Comments: 43
  1. 0
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    Upsizing does not necessarily equate with bigger in retirement. Seeking a sea change and downsizing to make life easier in retirement cost more than our large home in the suburbs. As a self funded retiree, it had nothing to do with trying to maximise the OAP. I don’t believe the family home should be asset tested by Centrelink.

  2. 0
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    Just shows how stupid Centrelink is in not asset testing the family home. It is so easy to get the full pensions with many millions. Just buy a house and only leave enough assets to qualify for full pension. You then have an income and an asset that increases in value tax free.

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      Indeed and it makes you wonder why such an idea is considered appropriate. In the current low yield and highly risky investment environment a better located home that returns tax free yield makes a lot of sense. The $800 000 or so needed to support a typical aged pension and concessions can then be spent for enjoyment instead of the long haul of saving for yourself.

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      I’m pretty sure Centrelink would be happy to assess the family home if it was included in the assets test. Nevertheless it’s inclusion is inevitable, and probably not too far away as the war gen leave god’s waiting room. YLC reports more than 255,000 Australian pensioners live on taxpayer-funded incomes while owning homes worth more than $1 million. Further, almost 30,000 age pensioners live in homes worth more than $2 million and receive more than $680 million in pension payments annually. I think it is a reasonable prospect the cut-off value for inclusion might be tied to the max superannuation pension cap balance of $1.6 million.

    • 0
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      $680 million is a drop in the bucket when you consider the value of subsidies given to foreign corporations, in the billions, who pay little or no tax at all. This can’t afford it is a myth. If the government needed extra revenue then they wouldn’t have privatised everything that made money.

    • 0
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      You may be big but certainly not very caring are you bear?

  3. 0
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    This should be stopped.
    Millionaires are getting the pension.

    • 0
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      Of course it should be stopped and will be at some stage.But it has nothing to do with being millionaires.These days almost everyman and his dog is a millionaire..or will be soon.The biggest issue is that its hard to trust politicians to look at the situation fairly in assessing and indexing the value of assets before deciding the value affects pension eligibility.

    • 0
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      Exactly so Circum. The fact that non concessional amounts in income streams can be as high as 48% yet deemed as only 10% for Centrelink means any made up circumstance can be justified by Government and few will complain about any fairness or equity issues.

    • 0
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      So I can get the pension!
      Really how so?

  4. 0
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    “Would you ever consider buying a property bigger than the one you already live in? Do you think it is fair that pensioners who live in very expensive homes do not have their family home asset tested?”

    The answer to the first question is: “No!”

    The answer to the second question is: Gee Ben, hasn’t this topic been done to death? It seems to be appearing in this forum in one form or another almost weekly and the responses are very predictable with no definitive answer to the question.

    • 0
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      The Financial Industry is itching for yet another change and way to strip yet more tens of billions in fees and charges for advice because it’s all so damned complicated and risky.

  5. 0
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    I believe one would need to very careful in upsizing. Centrelink may view that differently at the time if that action was taken; that is upsizing in order to get an aged pension. Basically rearranging one’s affairs for just that reason. Be good to see a test case !!

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      They are not interested, if you show the money went to you HOME purchase that’s it, all good, here’s your pension.

    • 0
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      Tens of thousands upsize at retirement building lovely homes in Noosa, Port Macquarie canals and other very expensive areas without a whimper from Centrelink. Centrelink only object if you are foolish enough to try to save to support yourself.

    • 0
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      Have to agree with you Rae and esp. re foolish enough to try to save to support yourself. Only fair way is a universal pension and it doesnt cost the govt any more

  6. 0
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    This is exactly why, for the sake of fairness to all, the family home needs to be included in the asset test.

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      Well no it isn’t, Hawkeye. What would make more sense is that it is only included if you bought a bigger house within say 10 years of applying for the pension.

      People who have lived in thier home for decades should not be treated unfairly just because their home has increased in value over time. If the intention is to stop people burying financial gains in bricks and mortar then close the loophole by putting a timeframe of ownership on it. Afterall those who ‘upsize’ to obtain a Government pension, can ‘downsize’ later to avoid same!

    • 0
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      Remember, Hawkeye, as people get older many will need to live in districts close to medical facilities, transport, etc which usually means higher property costs, even for a very modest home. It is not the fault of an elderly home owner that makes the house s/he bought for $50,000 now worth upwards of $600,000.

  7. 0
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    I certainly get the impression here that jealousy is also prevalent on this forum . Just what is an advanced age person to do who lived in the family home all his life and has no income to support him ? Some of you would have them kicked out of their home and rob them of the place they love and also often can go back some generations . Do you also want to blame them for the increases in property values over many years ? There are also sometimes reasons like people forced out of their home by Government compulsory acquisition or forced to sell due to old age and health problems to live near a family member for help .

    • 0
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      Good to see compassion and common sense, Oldman Roo. A universal pension is definitely a necessity as it would get rid of all the “kick ’em out and let ’em starve” opinions.
      Developing countries have introduced universal pensions with success but not the so-called developed country Australia.
      Let’s get rid of all ridiculously high and mostly tax-payer funded pensions of public servants, bureaucrats, bank CEO’s…everyone gets the same pension and saves from their earnings if they want a few luxuries in retirement.

    • 0
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      Agree with Triss. Esp. re pensions of public servants, bureaucrats, bank CEO’s. Plus need for universal pension which is the case in most developed countries.

  8. 0
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    Perhaps it’s time to stop tormenting the elderly and move to the young ones. “No, you can’t sit at a coffee shop and drink latte and eat avocado on toast, the government wants that money so go home and have bread and jam and a pot of tea.” No, you can’t go off on a skiiing holiday the government wants that money to pay off its debt.” “Don’t forget to buy a house and go without any kind of luxury to pay the mortgage so that when you’re 67 the government can take it from you.”
    Tongue in cheek but only just.

    • 0
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      Sounds like the old days and public servants Triss. They were made to contribute big after tax amounts which meant it was tea and jam for years so a healthy income stream could be paid for.

      Funny how you can’t spend all your money on the lovely things and holidays and still have savings.

  9. 0
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    Want to save money ScoMo ? Grant everyone a universal wage in retirement and all the compliance costs stop !

  10. 0
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    Those of you who think the home should be included in the assets test, how would you treat this little old lady. My 93 yr old mother in law has had the same house since her and hubby bought it 60 odd years ago. The house itself is worth nothing as it is falling apart, but it is in on a big block in a suburb whose value has soared over the years. MiL is still living there alone but with help and wants to stay. She gets a full pension upon which she relies to live. If that house (actually land) value was taken into account she would get nothing.

    • 0
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      Yes, Bunderbergian, there are a lot of pensioners in the same situation as your mil and it’s irritating how many folk on this link don’t understand that.

    • 0
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      Only an idiot would assume that, if the home was included in the assets test, the threshold would not be adjusted accordingly.
      Therefore, the vast majority would see virtually no change unless they are wealthy or rorting the system (or both, as they usually go hand in hand).

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