Here’s the results to our quiz
We know that the overall level of engagement with super savings is quite low across the population. If you are in your 30s – say 20 – 30 years before Preservation Age – this lack of interest is not exactly ideal, but perhaps it’s understandable. You may think there’s little you can do about your eventual nest egg right now while you’re busy juggling work, study and family commitments.
But if you have reached or passed the age where you can access your super, it’s important to ensure you at least know a basic minimum about the rules you could be using to maximise your savings.
That was the intention of our five-question super quiz in mid-August:
- to find out how many members have a working knowledge of their super options
- to learn more about the rules you may struggle with, and
- to briefly explain the rules along with the answers so you could learn as you responded
A big shout-out to the more than 3000 Retirement Essentials members who took the five or so minutes to answer these questions. We now have a much clearer idea of the best information to share to keep you totally up to date with your super savings options.
Here’s the five questions and how the majority of respondents fared.
Question 1 – WRONG
At what age are pre-retirees able to activate a Transition to Retirement (TTR) strategy using their super?
The answer was NOT at 55, 60, 65 or Age Pension age, but at Preservation Age, which can vary from individual to individual depending upon your date of birth. It may have been 55 or 60 for you, but this does not apply across the board.
61% of respondents got this answer wrong, only 39% answered correctly.
Question 2 – RIGHT
Superannuation earnings are tax free once you reach age 60. True or False?
The answer is False. You need to move your money from accumulation to decumulation (usually into an Account-Based Pension) to enjoy tax-free earnings.
63% of respondents answered correctly, with 37% getting the answer wrong.
Question 3 – WRONG
Do you need to declare income earned from super when applying for an Age Pension?
Yes or No?
This question had the biggest error rating, with 68% answering incorrectly. Only 32% knew the right answer, which was ‘No’.
Super savings are viewed as assets by Centrelink (with the exception of certain Defined Benefit Funds). This means you list your savings in super as assets and Centrelink automatically ‘deems’ how much you earn from this account.
This is a worrying error as it tells us some respondents who have checked their eligibility or applied for the Age Pension may have done so based on ‘double reporting’ of their super as both an asset and as income. If this could have happened in your case, use our free Age Pension Eligibility Calculator to check your entitlements again, noting that super is an asset and you do not need to list the associated income stream as income as well. this could very well make the difference between receiving an Age Pension or a knockback!
Question 4 – WRONG
If you use the ‘Downsizer contribution’ to contribute to your super, what is the maximum amount a couple can contribute?
Again, this question causes confusion, particularly when it comes to caps for couples or singles. The correct answer was $300,000 x 2 = $600,000.
Only 35% of respondents replied correctly. And 31% listed the singles’ amount of $300,000, suggesting couples combined amounts are not well understood. With 65% of responses incorrect, we will explain this rule and how it differs from the Bring Forward Rules – which is up to $330,000 each or $660,000 per couple if you meet the eligibility requirements – more fully in a future enewsletter.
Question 5 Right
You can’t contribute to super once you have retired and stopped working. True or False?
This question was answered correctly by 75% of respondents, with only 25% not knowing this rule. The answer is False. You can contribute to super up to age 75 and can use the Downsizer Contributions and Bring Forward provision to really boost your nest egg.
So the quiz ended on a high with that score of 75% correct for Question 5.
But overall, across the 3,000+ responses, most members only got two of five questions correct.
These basic, top level rules are of great relevance to most older Australians at some stage in their retirement journey.
We’re here to help, so please do ask us your most pressing super questions in the comment box below.
Here’s a link to an overview of the role super plays in your retirement funding.
And if you feel you could benefit from a 90-minute ‘Understanding more about super’ tailored consultation with a qualified adviser, here’s how you can get started today.
How about you?
How well did you go in the quiz?
Were you surprised by your score?
Are there any other questions that you find particularly confusing?
Question 5
I am still confused
I am 77 years old work part time for an employer and they pay super for me into my existing super account
You mention that you can pay super until only 75
Are we breaking the law ??
Hi Angus, thanks for sharing your situation with us! Please be assured that neither you nor your employer are breaking the law. Employer contributions to super are allowed however only the minimum contribution they are required to make by law. You cannot salary sacrifice addition money in to super or utilise any of the other methods mentioned in the article once you are over 75.
Even if you don’t get the age pension at a certain age you should be able to get the benefits of age pensions, like cheaper medication like any other aged person.
Apply for the Commonwealth Seniors Health Care Card. Pharmaceutical benefit is all you get with the card.
What are the pros and cons for making use of the downsizer contributions to super or keeping money in the bank in the current market.
Hi Carol, thanks for your question! It can be tricky to answer specifically as it will always depend on your personal circumstances. There are some tax benefits for having money in superannuation, but the potential advantage of this can depend on your current or future level of personal taxable income and probably needs to be considered in more detail. Regarding investing in super or keeping funds in the bank – when considering superannuation remember that it is ultimately a tax structure. Inside of superannuation you can usually access a range of different investment options, from cash/term deposits to share and other investments (depending on your super provider), and a range of a bit of everything in between. If it is the level of investment risk you are wondering about then it may be worthwhile having a one-on-one consultation with us to discuss your specific needs, expectations, and concerns before making any decisions. You can book a consultation by clicking here, a Strategy Consultation would most likely be best, where we can discuss pros and cons of inside/outside super, as well as helping you to figure out an approach to making investment choices that can help you feel more confident about the future. All the best, Nicole.
I’m 69 & have been retired since 2015. I took a lump sum payment and receive a defined benefit income stream. I do some occasional work and have been told I cannot contribute to my super fund (PSS). Is this correct?
Hi Diane, thank you for seeking clarity from us! It is true that you cannot make further contributions to your Defined Benefit account because it is in pension phase however you can set up another superannuation account in accumulation phase and have your current employer make payments into the new account. If PSS do not offer an accumulation account you can look at other superannuation providers.
We are wanting to build a house and wanting to know the advantages/disadvantages of using our present super money to do so and then after the build, selling our present house and contributing that back to the superfund. Is that downsizing?
Hi Lee, thank you for reaching out. When considering whether to withdraw large amounts of money from super for a short term, with the intention of recontributing it back in, there are lots of things to consider: Such as, will I miss out on returns while the funds are out of the market? Is there a more flexible or cost effective way to access the capital I need? Do I meet the rules to withdraw from and re-contribute back into super? What is the criteria of a Downsizer contribution and what might be the impacts on Age Pension benefits in the short, medium or long term? The answers to these questions are dependant on your individual circumstances and what you are trying to achieve. We would be happy to discuss these with you, help you understand your options and some of the things you might need to consider in one of our General Advice consultations. We look forward to meeting with you. Thanks, Megan
Are employer generated defined benefit pension schemes/amounts from accumulated superannuation classed as assets rather than income?
Hi Shane, thank you for seeking clarity! Defined benefit pensions are assessed as income by Centrelink but accounts left in accumulation are assessed as assets.
All great information… def some i knew.. an some i did not. I am recently retired and 70…and understand my previously untaxed (Sgc) super could be subject to tax if i don’t strategically withdraw and recontribute… i do not understand the method to do that…and it now seems i need to downsize before i am 75?