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Accessing Age Pension When Over the Assets and Income Test Thresholds

Written by Michal Lancemore

Accessing even $1 of Centrelink Age Pension is a goal for many retirees – Hudson clients included!  As soon as you access that $1, the ancillary benefits begin – for most retirees, the medical benefits are often the greatest gift.  For individuals whose income and assets exceed the thresholds for age pension eligibility, there are strategies available to unlock age pension benefits even if one surpasses these thresholds. One such method is through the use of Annuities.

This goal in retirement planning is to optimize income streams while maximizing age pension benefits where applicable.  In saying this, I cannot stress enough why engaging a financial planner is so critical at the retirement juncture.  Retirement planning is complex!  A financial planner can assess individual circumstances, goals, and preferences to develop tailored retirement strategies that can incorporate Annuities. Additionally, we can provide guidance on structuring assets, maximizing age pension benefits, and navigating regulatory requirements.

Restructuring assets to meet age pension eligibility criteria can involve converting assessable assets into exempt assets or reallocating investments to reduce assessable income. I will focus only on Annuities in this Report, but there are many other approaches that can help individuals access age pension benefits and enhance their retirement income.

Annuities, also known as lifetime annuities, are financial products designed to provide a regular income stream for the remainder of an individual’s life. An individual makes a lump sum payment to an insurer in exchange for guaranteed periodic payments for life. These payments can supplement retirement income and may assist in meeting age pension eligibility criteria for individuals whose assets or income exceed the thresholds.  Under the income and assets test Centrelink will assess:

  • 60% of the purchase price of the lifetime income stream until age 84, subject to a minimum of 5 years; and
  • 30% of the purchase price thereafter.

This concessional assessment can be attractive compared to alternate investment structures where 100% of the asset is assessable.

Annuities can contribute to overall retirement income efficiency by providing a stable and predictable income stream throughout retirement. By combining Annuities with other retirement income sources such as superannuation, investments, and government benefits, clients can create a diversified and resilient income portfolio. One of the insurers on Hudson’s panel of approved products is Generation Life.  Below is an example of how multiple income streams can improve overall income generated:

mic graph march 24

Below is a snapshot of their myths versus facts about Annuities:

MYTH FACT
I will lose all of my investment if I pass away early All lifetime annuities offer a death benefit
The provider will default All lifetime annuity providers are regulated by APRA
Annuities don’t offer value for money Designed to provide more cumulative income sooner and higher starting income that grows over time (ie LifeBooster)
Annuities are fixed income products A wider range of investment options across a major asset classes
Annuities are too complex Simple to manage once your investment has been set up
High tax returns that dimmish overall returns All the funds are invested in tax free environments whether the annuity is purchased with non-super and super monies
Annuities are inflexible Investment-linked lifetime annuities offer more choices and flexibility
No access to capital Withdrawal benefit available

 

Source: genlife.com.au

 

 

 

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