How can this increase your income?
In any couple one of the partners by nature will be younger. That’s a given. What is less well known is the radical difference it can make to use the rules of retirement income to your advantage if one of you decides to leave full time work first.
These rules apply to both the Age Pension and superannuation. So what do you need to know to ensure you are making the most of your money and pension entitlements? Here’s an easy guide to bring you up to speed.
Can I apply for an Age Pension before my partner?
Yes you can but your combined assets and income will be assessed as a couple. If you are eligible you will receive half of the couple’s age pension entitlement. When your partner reaches pension age he or she can apply and you will receive your full entitlement as a couple.
Can I apply for an Age Pension if my (younger) partner is still working?
Yes, but you need to be aware that his or her income will be included in the income test for a couple, so it could affect the amount you are eligible to receive.
What do I need to declare when it comes to our assets?
This is where it gets tricky. How you manage and declare your superannuation will have a major impact on your eligibility. Here are the main rules:
Your partner’s super will be in one of two phases – accumulation (before drawing down) or decumulation (once they’ve reached preservation age and decided to draw it down).
If your partner is under Age Pension age and their super is in accumulation mode then there is no need to declare it.
If it is in decumulation phase – and they have started an income stream – then you do need to declare it.
Why does a transfer of my super assets help if we are a couple?
Let’s say your partner’s super is in accumulation mode, which means it is not subject to an assets test for your pension eligibility. You can transfer some of your super to their account, thus reducing your own assets, and therefore bringing yourself within the asset threshold for either a full or part Age Pension.
Is this the same as the bring-forward rule?
Not quite, the ‘bring forward’ rule just means that you can make higher non-concessional contributions (up to three years or $360,000) to your super in a single year, with certain eligibility requirements attached. ‘Bring forward’ is also used by people who have downsized to put extra funds into their own super.
What if we split up? Have I just foregone a major slice of my super?
Theoretically no, your combined super will be appraised as such for any financial separation or divorce settlements. So you haven’t lost more money than you would have before the transfer of any super. Common sense suggests that if you are in any way uncertain about the likely duration of your relationship, moving money in order to maximise benefits may not necessarily be your best strategy. This situation calls for open and honest communication with your partner – and not just about your money.
Natalie and Vijay
Natalie and Vijay met on a cruise and have been together ever since. Vijay is eight years younger than Natalie, who at 67 is in the process of applying for an Age Pension. Vijay plans to work for a while longer and this means their joint income will be $55,000. As Natalie’s stated assets are $980,000, they are over the $915,500 couples homeowner threshold. Because Vijay’s super is in accumulation mode, Natalie is able to contribute $80,000 of her super to Vijay’s account, thus reducing her assets to $900,000 which is below the assets test threshold. which results in a modest part pension for Natalie of $23 per fortnight, or $604 per annum. This pension entitlement also gives Natalie a Pension Concession Card and includes pension supplements. This is conservatively worth an extra $3000 per year in entitlements. Had Natalie not transferred the super to Vijay’s account, she would have missed out on any Age Pension benefits.
The situation for Natalie and Vijay is relatively simple. But how do you review your own situation and maximise your income based upon the age of you and your spouse?
As you can see from the rules above, there is a degree of complexity attached to spouse rules, which require a clear understanding of Centrelink and superannuation allowances as well as the status of your own investments. The snapshot of Vijay and Natalie shows how such rules can work well. But the sums of money involved often represent a major portion of most peoples’ savings. It’s therefore important to first seek advice before you make non-reversible transfers.
First, check your current and possible future entitlements on Retirement Essentials’ Age Pension Entitlement Calculator.
Then if you are in anyway unsure whether such a transfer is wise, consider a consultation with one of our expert advisers.
This article is provided by Retirement Essentials Representative Number: 001260855. We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859. This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.
Great article thanks
Can you please explain what would happen if 1 partner is over retirement and preservation age with no Super and the other is well under preservation age in accumulation phase? Is there a maximum amount that the younger partner can earn before the pension is not provided, especially when the older partner is too Ill to work?
Thanks
Hi Andrea. In this example the younger partner’s super will not be counted in the asset test as they are below Age Pension age and the super is still in the accumulation phase. There is a second part to your question however as the younger partner’s earnings will be counted in the Income test. As a couple you can currently earn up to $86,154 before the Age Pension cuts out entirely. Click here for the latest rates and thresholds.
I get $638.79 as a part pension as my partner works. She gets $800- a fortnight. My gripe is if she was on a pension we would get more money a fortnight.
I have recently retired and about to turn 68, my wife who is 67 is still working part time and contributing to her super, does her super amount become part of the assets test if i apply for a part pension while her super is still in accumulation stage.
Thank you
Your constant information is invaluable
Greatly appreciated.
Hi Laurence. Once your wife reaches Age Pension age, which she has, her super, even if still in the accumulation phase will be considered an asset and be assessable in the assets test. You can read more about that here.
If I retire but my wife is not yet at retirement age and not working,is it still beneficial to contribute to her super.
Hi Mick. This will depend on a number of factors. e.g If you only receive a part pension, or no Age Pension at all, moving money into your spouse’s accumulation account could improve your eligibility status. You can book a consultation with one of our Advisers if you would like to know more.
what if my Partner and I do not share any of our finances – we both contribute to the rent and facilities and food but the rest of our finances are separate – can I apply for a pension if i decide to retire next year without his income being considered?
Hi Dennise. Unfortunately from what you have said you will still be considered as a couple and treated accordingly by Centrelink i.e. his income will be considered
Hi Retirement Essentials,
I hope this conversation is still open. I am 69 years old and I am receiving a part Age Pension. My wife is 60 years old and is still working. She has a Superannuation account that is in the Accumulation phase. I am considering if my wife should open a T.T.R. with a portion of her Accumulation balance.
Being under the eligible pension age, her Superannuation Accumulation account is currently not considered by Centrelink’s Income & Asset tests. If my wife did open a T.T.R., I am wondering if either the balance of the T.T.R. or the balance of her remaining Accumulation account (or indeed both balances), would be taken into consideration by Centrelink when it comes to assessing my part Age Pension?
Although not financially essential for us, I would like to explore it as a potentially viable string to our bow.
Cheers, Jeremy.
Hi Jeremy, thanks for reaching out. Any funds that are moved into a TTR pension would become assessable assets under the assets test, and deemed for the income test, for the purposes of calculating your age pension entitlement. However, how much this could impact you may be a complex calculation and there are other considerations to weigh up. I would recommend a strategy consultation so we can discuss the implications both now and into the future of age pension entitlements, longevity of wealth, and the things to think about when considering a TTR. Best wishes, Nicole.
I am receiving a part pension. My wife is just short of pension age. We have virtually no super, and have a half share in an investment property which we plan to sell this year. My wife hasn’t worked for over 20 years due to ill health. Is she able to apply for a pension prior to turning 67?
Hi Roger, you wife can apply for her share of the Age Pension 13 week prior to turning 67. She won’t get any payments for that 13 week period but you can at least get the claim in and maybe even approved so she can start getting paid as soon as she turns of age.
I am 70, on a part pension and my younger partner an has accumulated super fund which I know is not calculated against my pension. She will turn retirement age(67) in a year or so.
If at that time she decides not to apply for a pension and to also not at that stage to transfer her accumulated super to a retirement pension fund would my pension remain unaffected.
My thought is that if she is not applying for the pension and not transferring to a retirement fund that it would not affect my pension. Can you confirm?
Hi Colin, sorry to be the bearer of bad news, once she turns pension age your partner’s super is considered assessable regardless of accumulation/pension mode the same as yours is. Furthermore Centrelink expect you to provide them with the most recent statement from her superfund at that time so that they can code it in and recalculate your pension. If you do not do this then yes your payments will remain as is but once Centrelink finds out that her super does exist later on, and has existed since she turned 67, they will then raise a debt against you for the overpaid Age Pension.
I am 65 and my wife is 60. I retired and put my super into pension phase about $800,000 while she has no super. Can I put some money into a super account for her so that I may qualify for a pension card when I’m 67 ? Thanks.
Hi Dean, yes you could potentially do this. To understand the ins and outs it would be best to speak with one of our specialists HERE.