Is your spouse younger than you?

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 n 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 $330,000) 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.

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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.