Will taking super early affect the pension?

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Chris’s wife is considering taking $10,000 out of super early but is worried her pension will be reduced.

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Q. Chris
My wife will shortly be laid off work due to the coronavirus. I understand the government is allowing people to withdraw $10,000 from their super account. My wife is considering taking up this offer to pay out our mortgage. I receive a DVA TPI pension, and even though my wife is 60 years of age she can apply for the age pension. Our plan is to use up my super first, then access her super when she turns 67 as she does not have to declare her super in the assets and income test until then. If she decides to take up the government offer and withdraws $10,000 from her super account, does she then have to declare the remainder of her balance ($300,000) in the income and assets test, which will mean her pension would be reduced?

A. The applications for early release of superannuation will be accepted through myGov from today (20 April).

Individuals don’t need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

The government is allowing individuals affected by COVID-19 to access up to $10,000 of their superannuation in 2019–20 and a further $10,000 in 2020–21. 

Eligible individuals will be able to apply to access up to $10,000 of their super before 1 July 2020 and a further $10,000 from 1 July 2020 until 24 September 2020.

To apply for early release, you must satisfy one or more of the following requirements:

  • you are unemployed
  • you are eligible to receive a JobSeeker payment, Youth Allowance for job seekers, Parenting Payment (which includes the single and partnered payments), special benefit or Farm Household Allowance
  • on or after 1 January 2020, either you were made redundant, your working hours were reduced by 20 per cent or more, or you were a sole trader and your business was suspended or there was a reduction in your turnover of 20 per cent or more.

You will not be required to attach evidence to support your application; however, you should retain records and documents to confirm your eligibility.

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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.

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Written by Ben

11 Comments

Total Comments: 11
  1. 0
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    even though my wife is 60 years of age she can apply for the age pension

    Why is that possible ??? please explain

    • 0
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      Might have something to do with his particular pension – DVA TPI pension (Dept Veterans Affairs). They would have to explain this.

    • 0
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      The key is that the husband is a DVA pensioner and the spouses of those eligible for a DVA pension have a retirement age of 60.

    • 0
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      I think it’s only if they are TPI isn’t it? (Totally and Permanently Incapacitated)
      I don’t think the conditions of a DVA pension are any different to those of the Age Pension.

    • 0
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      Horace you have the answer. I remember a work mate of mine (62 years old), having been sent by me to our financial adviser to find out about retirement. She came back, gave me a bottle of Scotch and handed in her notice. She was told she could retire immediately since her hubby was on DVA pension. Not many are aware of this.

    • 0
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      As far as I am aware the pension qualifying age for veterans is still 60. I know that over 15 years ago I was advised that as a veteran I could get the age pension at age 60 rather than 65. It was called a Service Pension and had exactly the same conditions, apart from age, as the age pension from Centrelink. I just checked the DVA website and it is still 60. Thankfully I chose the decline the invitation and kept working.

  2. 0
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    I don’t think it’s a good idea for a 60 year old to be taking $10,000 out of super at the moment as it would consolidate the losses of the past few months. I won’t be touching my super until it recovers its pre-COVID balance.

    • 0
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      Good strategy if you have the time to wait and are not in need of that $10’000. Some people obviously find themselves in a bind and want to use that money now instead of having it later on for retirement.

    • 0
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      As the balance in her super is $310,000, a withdrawal of $10,000 is only about 3% and it will be used to reduce outgoings because the mortgage will be repaid, it may be a prudent decision.

    • 0
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      So I think it will take a couple of years to make up for the losses we have incurred in our superannuation. Could be longer, how long do you think it will be Fedup?

  3. 0
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    This may not be the same as what is being discussed but i retire in a years time i am not working i lost $33,000 in 2 weeks i went and moved it to cash i have not lost anything since then but i would not be able put back what i did lose unless the markets changed


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