PUMP IT UP

SEVEN WAYS TO BOOST YOUR AGE PENSION

Convinced that you are going to have to sell the family home and live in a tent, you are ripe for the picking by an investment “professional” who can show you how, with “minimal risk”, you can get close to the $1.6 million you need to retire comfortably. Financial advisers, superannuation funds, real estate spruikers and self-managed super fund promoters usually get paid according to how much they get you to invest. That’s why they will never tell you that a couple with $270,000 in superannuation and savings can easily:

Generate an after-tax income of $48,000 a year. Have it indexed for life using lower-risk strategies. Still have funds for travel and other fun things.

Let’s use the example of soon-to-be retired couple Malcolm and Lucy, who own their own home in suburban Sydney. They are both a few weeks shy of their 66th birthdays and have managed to build their super up to

$225,000 and have a further $40,000 in a term deposit. They keep $5000 in their day-to-day transaction account. With their super and cash, a house worth $900,000, a new-ish Nissan X-trail, Jayco caravan and the usual household items that you accumulate over the years, Malcolm and Lucy figure their total worth is $1,342,000.

No way that a millionaire couple will get a pension, right? Wrong. When calculating how much of the age pension Malcolm and Lucy get, Centrelink ignores the value of the family home (which is exempt) and takes the fire sale value of everything else.

The X-trail was $32,000 new but on carsales.com is worth

$24,000. Their furniture and appliances may be insured for

$150,000 but would fetch $10,000 on Gumtree. Once those discounts are factored in they only have

$316,000 in so-called “assessable assets”. A homeowning couple can have up to $387,500 in assets and still get the full pension, and Malcolm and Lucy’s $316,000 is well under that.

There’s one more problem though – Centrelink also applies an income test to pension applicants. A couple like Malcolm and Lucy can earn up to $304 a fortnight from investments such as superannuation and term deposits and still get the full pension. Centrelink estimates that on their super and savings of $270,000, Malcolm and Lucy will earn $288.46 a fortnight – under the income-free limit. They get a full age pension of $1381.40 a fortnight.

Knowing they have that pension income guaranteed, Malcolm and Lucy can structure their investments to make up the shortfall and guarantee themselves a fun and stress-free retirement.