Small adjustments reap big rewards
Amanda Hardy Lai is a problem solver at heart. After studying science and philosophy at uni, she took a temporary job to answer calls for finance expert Paul Clitheroe’s company. She quickly realised that she enjoyed this work, and that the world of investment was actually really interesting. Fast forward a couple of decades and Amanda is now the mother of two teenagers living near the coast in suburban Melbourne. She loves swimming and pizza. And she loves solving problems even more!
‘The best thing about my role at Retirement Essentials is engaging with people.’
Amanda is also responsible for many of the explanations in our weekly enews:
‘Sharing stories and explanations is a big part of my job. I love being the person who can break down complex information and make it easier for others to understand.’
One common situation when planning for retirement is that many people assume they won’t qualify for Centrelink benefits – especially if they’ve built up a good amount of super. But the reality is, eligibility rules are complex, and small adjustments can make a big difference.
Gary’s path to greater financial security in retirement
Gary, 68, has just retired and started an Account-Based Pension (ABP). His wife, Anna, is 58 and currently works part-time, earning $50,000 per year. As a self-funded retiree, Gary assumed he wouldn’t qualify for any Age Pension benefits. With a combined super balance with Anna of $1,175,000 and with Gary receiving a defined benefit pension, he had been relying on the Commonwealth Seniors Health Card (CSHC) for health concessions, but thought this was his only possible entitlement
When he heard about the younger spouse contribution strategy he wanted to explore whether it could improve his financial situation. In particular, he was interested in whether he might qualify for a small Age Pension payment, which would automatically entitle him to the Pensioner Concession Card (PCC)—offering additional benefits, including hearing services. This was important to him, as he had been struggling with hearing loss, making phone conversations and group discussions increasingly difficult.
Uncovering hidden entitlements
We began our consultation with a review of Gary and Anna’s financial position, including the way that Centrelink assesses their income and assets. Gary’s defined benefit pension was asset-test exempt, meaning only $1,200 of fortnightly income was assessed (after applying the 10% cap for exempt income). Once we completed the full picture, we found Gary was already eligible for a small part-Age Pension of around $1,000 per year—something he hadn’t realised.
Exploring the younger spouse strategy
Next we looked at whether shifting some of Gary’s super into Anna’s accumulation account (where it wouldn’t be counted under the asset test) could further increase his Age Pension.
Currently, only $655,000 of their combined assets was being assessed, well below the $1,045,500 cut-off for homeowner couples. The limiting factor for Gary’s Age Pension entitlement was the income test—where their financial assets were deemed to generate income, and Anna’s wages also counted toward the threshold along with Gary’s defined benefit income.
By moving $100,000 of Gary’s super into Anna’s accumulation account, we projected his Age Pension could increase by $1,125 per year under the income test. However, if their entitlement had been impacted by the asset test, the same strategy could have increased payments by up to $7,800 per year—highlighting the importance of knowing which test applies.
Weighing tax implications
Another key consideration was the tax treatment of investment earnings.
- In a super accumulation account, earnings are taxed at 15%
- In an Account-Based Pension, earnings are tax free.
This means the benefit of moving funds from Gary to Anna’s super is modest, as the tax on earnings may offset some of the Age Pension increase, but it’s still an option for him to consider.
Building confidence in a safe spending plan
Beyond optimising entitlements, Gary and Anna wanted to understand how much they could safely spend each year without risking running out of funds. As with many retirees, Gary was cautious about drawing down too much from his super too soon, particularly given market volatility and the uncertainty of how long their money needed to last.
We ran a retirement projection based on their preferred investment approach, factoring in major planned spending on a new car, travel and home renovations. Based on a balanced investment approach, we found Gary and Anna could comfortably withdraw around $95,000 per year from their super, as well as their planned lump sum withdrawals – while sustaining a significant level of wealth in the long term. This gave them the confidence to enjoy their retirement without fear of overspending.
In summary, how did Gary benefit from our meeting?
- Age Pension eligibility: Qualifying for even a small Age Pension provides valuable benefits, such as the Pensioner Concession Card and access to hearing services not available with the Commonwealth Seniors Health Card.
- Younger spouse strategy: Moving funds to Anna’s super could provide a small increase in Age Pension over the next nine years until she turns 67, balanced against additional tax on investment earnings in Anna’s super fund.
- Safe spending strategy: Understanding the impact of different withdrawal rates and investment strategies helped Gary and Anna feel confident in their long-term financial security.
Amanda didn’t expect her philosophy degree to lead her to financial advice, but in hindsight, it makes perfect sense.
‘Studying philosophy helped me think about ethics and decision-making, which is a big part of my work now. I focus on really listening to people’s day-to-day concerns so I can give them the right information and help them feel confident in their choices.’
Gary chose a strategy consultation as a way of exploring his different questions which included Age Pension eligibility, superannuation options (including younger spouse rules which he was interested in) and spending forecasts. Learn more about all the different types of advice consultation offered by Retirement Essentials here.
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.
