Question 1: When will I reach the “Age Pension Age”? I was born in March 1958 (currently 63 years old). I ask this because I have heard varying ages. Does it vary depending on the year we are born? When they first extended the retirement age it only affected persons born from 1960 onwards, so I thought I was not affected.
The age pension age is gradually being moved from 65 to 67, and yes, it depends on when you were born, as per the following table:
A few years ago, the government proposed to increase the age pension age to 70. However, this was unpopular and has since been abandoned.
You also referenced a ‘retirement age’.
In Australia, we don’t really have an official retirement age; rather, we have an age when you become eligible to receive the age pension, and a separate age when you can access your super.
As you referred to 1960 in your question, you may be alluding to rules governing superannuation access.
You can access super at the following ages:
- At 65, even if you are still working
- At 60, if you have terminated an employment contact, regardless of whether you intent to go back to work again
- At your preservation age*, if you declare that you are permanently retired and do not intend to be gainfully employed again.
*The preservation age is moving to age 60 but for people born before June 30, 1964 it is lower than this, as shown in the table below:
As you were born prior to 1960, your preservation age is 55.
So, in summary, as you are 63, if you left your job, you could access your super now. But you would not be eligible for the age pension until you turned 67.
If you want to retire and are unsure if you can afford to do so, contact a registered financial adviser who can help you reach your retirement goals.
Question 2: Hi. Is it possible to “turn off” (“commute”) a self-funded superannuation pension income. i.e. go from Pension Phase back into Accumulation Phase? Thereby having “no” income in retirement.
I have heard if this is done, one can still have $200,000 in the bank, and use this to supplement the government pension.
The overall idea is to make the super balance last longer by living off the government pension, and just topping up the $200,000 in the bank with lump-sum super withdrawals as required, as it is slowly reduced by week-to-week withdrawals for living expenses.
I have been living on self-funded income from a super pension for several years, am 63 years old, and don’t work. Hope that all makes sense. Thanks, I enjoy your column.
I’m glad to hear you enjoy the column.
You can certainly “turn off” your superannuation pension income stream by commuting (rolling it back) to the accumulation stage. This can be done at any time and at any age. When you want to re-commence a pension, this again can be done at any time.
In terms of supplementing the government pension, it is important to note that when funds are in the accumulation stage, they are not included in Centrelink’s income or asset tests until you attain age pension age.
And so the money held in your super fund would avoid these tests if you moved back to the accumulation stage.
This would be an advantage if you are on another government benefit, such as JobSeeker or the Disability Support Pension (or if you had an older spouse who is receiving the age pension).
But there are a few issues you do need to be aware of:
- You have correctly stated that you can make ad-hoc withdrawals from super at any time, but many people find having regular payments easier to manage. The payments could be set up on a monthly, quarterly, or annual basis
- Once you are age pension age, it makes no difference for Centrelink purposes whether funds are in accumulation or pension phase; the balance will be asset tested and ‘deemed’ for income-testing purposes
- There are tax advantages to holding the money in pension phase rather than accumulation phase. Although all income payments and ad-hoc withdrawals are tax free as you are over 60, investment earnings within the fund may be taxed. In pension phase, all earnings are tax free. But within the accumulation phase, earnings are taxed at up to 15 per cent.
I would suggest contacting a licensed financial adviser, who will be able to assist in determining a sustainable income throughout retirement as well as the best structure to maximise any Centrelink benefits for which you may be eligible.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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