What are the risks of drawing down from super early?

Jacqui wants to know how her partner’s Disability Support Pension will be affected if he draws an amount of money from his super to lend to his mother.

Q. Jacqui
My partner’s mum has gotten herself in strife. She paid the deposit on a property and the sale of her current house fell through.

Now if she does not sell her house to pay for the new property by a certain time, she risks losing her deposit and that sale falling through.

She is asking my partner to lend her a large sum of money from his super. He is currently on a Disability Support Pension as he cannot work. How will this drawdown on his super affect his future disability and later pension? He is only 62, so nowhere near retirement age.

Read: When does super count as an asset?

A. Superannuation is an exempt financial asset for Centrelink income and assets tests for people who are below the Age Pension age.

However, it is only an exempt asset if it has not been accessed. If your husband were to access his super to give his mother the loan, it would no longer be exempt from the assets test and it would also have deeming applied and that amount would be assessed under the income test.

Depending on your situation, this could have a significant impact on his Disability Support Pension payments.

Read: How your superannuation affects the Age Pension

As well as his remaining superannuation being considered an asset, the money that he lends to his mother would also be considered an asset.

With regards to his future Age Pension, it would actually have very little affect, as once he reaches Age Pension age the money in his superannuation account would have stopped being an exempt asset anyway.

Where it could have an unintended consequence is on your own Age Pension application if you are younger than your partner.

Read: How selling and downsizing affect your Age Pension

As a couple your application is judged on your combined income and assets, which means your partner’s superannuation, if he chooses to access it before he reaches Age Pension age, will be included in the income and assets tests.

You might be better off asking your mother to consider a bridging loan while she waits for a new buyer for her existing property.

Assuming that she is receiving an Age Pension, a bridging loan will not affect her pension payments and will allow her to purchase the new property without putting undue financial stress on your own situation.

At the very least you should consider asking her to seek proper financial advice about how to best handle her predicament.

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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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