Confused by asset test rules for UK pensions

NOEL WHITTAKER

I HAVE a super fund in the United Kingdom, taken out in the 1960s. I received my first pension in 2003. I thought that was exempt from the asset test. I asked a Centrelink officer about this matter and he told me it was foreign income. He did not bother to look at the Social Security Act – sections 9A, 9B or 9BA. Any advice would be greatly appreciated. I am 75 years old and receive a Centrelink pension of $530 a fortnight. I have $100,000 in a term deposit and $7500 in another account.

According to a departmental spokesperson, the assets test includes all of a person’s assessable assets, whether in Australia or overseas. The assets test exemption available for income streams from 1998 to 2007 (under sections 9A, 9B and 9BA of the Social Security Act 1991) only applies to income streams purchased in Australia.

A pension acquired in the UK is not eligible for any assets test exemption under these provisions.

However, many UK employer and Government “defined benefit” pension schemes have no asset value because the person has no access to the capital – that is, the person cannot cash in or commute the pension.

Under the income test, all income earned, derived or received for a person’s own use or benefit is counted, regardless of whether the income source is from within Australia or from overseas.

The only exceptions are those items specifically exempted under social security law. UK pensions are generally treated in the same way as any other income received in Australia, to make sure people in similar circumstances are treated the same way. MY wife and I are both 53 and plan on retiring at 57. We have investments to take us through until we are both 65, when we plan to access our super drawing a fortnightly income. At the age of 57 can we roll over one of our super accounts into one account to save on fees, as we plan not to touch the account for seven years? We are both in the same super fund.

You can’t have a joint superannuation account but, as you point out, you can certainly both be with the same fund.

An alternative would be to start your own self-managed superannuation fund, but this may not be appropriate in your circumstances.

Once you have reached your preservation age, and have satisfied a condition of release

United Kingdom pensions are generally treated in the same way as any other income received in Australia

by stating your intention to retire permanently, you could withdraw all or part of your super, depending on the components and the tax laws at the time, and then re-contribute the proceeds to the fund of just one person.

But, in my view, the flexibility of two separate accounts far outweighs any tiny benefit you may gain by saving fees.

Having just one account would not be my ideal. 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