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Ask the Expert: Getting better super? Make sure you’re comparing apples with apples

Financial adviser Craig Sankey answers your superannuation and other finance questions each week, and today reminds readers to first determine what type of retirement you want – and how much it will cost – before deciding on a super fund or pension plan. 

Mar 27, 2024, updated Mar 27, 2024
If a couple's combined income is greater than $3666.80 per fortnight ($95,337 per year), then they are not be eligible for any age pension payment.

If a couple's combined income is greater than $3666.80 per fortnight ($95,337 per year), then they are not be eligible for any age pension payment.

Question 1

I am 56 and my wife is two years younger. She is no longer working and is on a small compo payment of about $1000 a fortnight as she wasn’t working full time. I am looking to reduce my hours over the next few years and retire at 60. My current income is $150k including super and I have about $400k in super at the moment. My wife’s super is much lower. She is seeking a permanent disability payment and I think her super gets paid out with that (if successful). We own our home and a small rental property. I am concerned that once we get to 67 we won’t qualify for a pension due to our assets. I understand the rental and my super are both considered in the assessment. Can you advise on how to proceed at each step to maximise our income in retirement.

If your wife is successful in receiving a disability support pension, then there is no requirement for her super to be paid out.

Just like the age pension, the disability support pension is income and asset tested. Your super funds, while in accumulation and while you are below age pension age are not assessed.

As a home-owning couple, you can now have just over $1 million in assets, not including your principal home, and still receive a part pension.

From when you retire (age 60) to when you reach age pension age (67) I assume you will be drawing down on your super to fund your retirement income. It will then depend on your balance is at age 67 as to whether you qualify.

You could look to withdraw some of your super and contribute it to your wife’s super. In that way the funds may be sheltered from Centrelink for another two years, but at that point they will be assessed.

You could also consider a lifetime annuity or pension. This involves locking your money away in return for receiving a lifetime regular payment. Generally, this means only 60 per cent of the purchase price is counted by Centrelink, which may be enough to qualify you for a Centrelink payment.

You may also want to look at what to do with your investment property. In retirement there may be ongoing cost, it may not provide you with your required income and is not flexible (you can’t sell just a couple of rooms).

However, maximising your retirement income is not just about age pension and certainly not about age pension from day one.

More important is working out what type of retirement you want and how much that will cost. This will give you an idea of how much super you need to draw down on, either via an account-based pension, lifetime annuity or a combination of the two.

Once you work out what a reasonable standard of living in retirement for you is, you can then factor in the age pension once you start spending your money and your total assets reduce to below $1 million.

Question 2

I’m 70 and my super for the financial year 2022-23 showed -2 per cent return for the year. The super is $350K kept with this fund. Reading an article indicated that for the year most of the funds are returning 8.5 per cent. I’m in a balanced option. As this amount held with this fund is the result of hard working over the years, I don’t want to see my return vanished or eaten by the low return. My super fund is recognised as one of the top five in Australia. Can I withdraw the full amount and put it in one of the big banks’ term deposit attracting 5 per cent without the headache? Would doing this affect my pension? I looked at the fund investing in cash option but their fees are not justifiable.

It’s important to compare apples with apples. Not only in relation to comparing funds that have a similar level of risk and asset allocation, but also over the exact same time period.

Even more important is to look at performance over a long period, say five years plus.

Having said all that, negative 2 per cent for last financial year does sound like a very poor result.

If you have the ATO linked with your MyGov, log in to obtain a personalised comparison of how your super compares with others. If not, you can use the ATO’s generic version of the ‘YourSuper’ comparison tool.

It’s important to choose a high-performing fund after fees. Even more important is choosing an investment option that matches how much risk you are willing to take.

After choosing the fund, they should be able to advise you, at no additional charge, which option is right for you.

Given your age, you always have the option of taking the money out and putting it into term deposit or a high yielding cash account.

From a Centrelink perspective this makes no difference. However, I would be wary of taking funds out of super as there may be tax advantages, it’s not always easy to get the money back in, and you have the option of setting up a regular income from it.

I suggest seeking advice prior to making that decision.

Question 3

I’m five years older than my husband. Can I get the pension if he’s still working?

Once you turn age pension age (67) you can apply for the age pension.

However, your husband’s income, including employment income, will be taken into account.

If your combined income (which also includes deemed investments) is greater than $3666.80 per fortnight ($95,337 per year), then you would not be eligible for any age pension payment.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

This column also appears in our sister publication The New Daily, which is owned by Industry Super Holdings.

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