Holding on should give person much bigger pension

It is critical that the survivor is capable of handling large sums

I AM 64, still work and am earning $25,000 a year. My husband is 74 and is receiving a part pension of $356 a fortnight. I have $700,000 in super and am thinking about withdrawing $400,000 from it, when I turn 65 to pay off our children’s mortgage. We own our own home. How would this affect my husband’s pension, will I have to wait six years to receive my pension and will I even be able to get the pension? Is it better for me to apply for the pension when I turn 65 years and then withdraw $400,000 as a lump sum? How would this affect our pensions?

The money you have in super will not be counted by Centrelink until you reach pensionable age – but obviously would have a big effect on your pension under the assets test once it becomes assessable.

If you give $400,000 away it will be treated as a deprived asset for five years but will then cease to be counted by Centrelink.

Therefore the main difference between giving it away, and holding it is a much bigger pension in five years if the current rules are still applicable then.

Whether you will be eligible for a pension in six years will depend on your financial situation then and the prevailing regulations then. A RECENT article stated that people over 18 are entitled to be paid 9.5 per cent of their wages in compulsory super.

Is that 9.5 per cent from their wages, meaning they get 90.5 per cent in their pocket, or 9.5 per cent on top of their wages from their employer’s pocket?

The employer has an obligation to pay 9.5 per cent superannuation in addition to the wage – it may be part of an award. IF A couple both have superannuation balances in pension mode of more than $1.6 million after June 30, and also substantial sums in accumulation mode, what will be the situation if one dies. Is it possible for the survivor to take over the $1.6 million tax free pension account in addition to their own?

A person is allowed only one $1.6 million tax-free account – but, if the survivor wished they could commute $1.6 million back to their accumulation account. This would increase the balance of their accumulation account by $1.6 million. They could then use the “gap” so created to transfer in the $1.6 million pension balance of the deceased. The bad news is that the entire accumulation balance of the deceased would then have to be cashed out and removed from the superannuation system.

The good news is that taxes on fund earnings on money held in the accumulation account are just 15 per cent. No minimum drawdowns would be required on that account.

The end result is that effectively $1.6 million of the deceased’s super ends up in accumulation and the balance is taken out of the system.

It is critical that the survivor is capable of handling large sums of money or else is open to expert advice. Noel Whittaker is the author of

Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au