Legal trick to keep your pension

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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Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.
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