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Balance Retirement & Aged Care Specialists

Tips to Maximize your Pension

Posted on: March 9th, 2017 by Eric Hiam in Aged Care Financial Planning

All retirees have been feeling the pinch of historically low interest rates, since the GFC, only to be compounded by changes to the Age Pension criteria, brought in by successive Governments, over the last 2 years, which have seen Age Pension entitlements also fall.
There have been at least 4 changes in the last 2 years to the treatment of certain investments, each one of these changes has resulted in the reduction of pension, so pensioners have been hit both ways on their investments & Age Pension
So, what if anything can a pensioner do, to try & maximise your pension entitlement, to make the most of what you have in hard times.

1) Update your financial situation with Centrelink

Gradual changes to your financial situation over time, may not have been reported to Centrelink, therefore it is possible that you may be getting less pension than you are entitled, especially if you have been using some of your savings to live off.
I spoke with a new client yesterday, who advised her parents Age Pension was $148pf, whereas my estimate of their pension entitlement was around $480pf each, ie they have been missing out on $8,632pa of Age Pension each.
This may be an error on Centrelink behalf, or they have simply not kept Centrelink up to date. Be careful the opposite can also apply , that is you are getting more pension than you should, could see you paying some pension back.

2) Market value of assets

Centrelink use the market value of assets when calculating the assets test, the market value of furniture is the amount you would get in a garage sale (that’s the market value) seeing you never get much from a garage sale, keep the value of your furniture low. Many people use the insurance value (ie the replacement value) which may reduce your pension entitlement. If you purchase a new car, it depreciates immediately, take advantage of this, & reduce the value of the car Centrelink count each year. A 4 y/o car purchased for $40,000, may now be worth $25-$28K, if you don’t update Centrelink you could be missing out on $45pf of pension ($1,170pa). Every dollar may help

3) Asset & Income Tested Advantaged Investments

Not all investments receive the same treatment under Centrelink Assets & Income Tests, some investments are treated in a way that delivers a pension advantage. Whilst the Government have been changing the rules over the last couple of years to take away the advantages, those changes are grandfathered, & hence some of those people who received the advantages, will continue to receive the advantaged treatment eg Complying Pensions, Allocated Pensions, & therefore you need to make sure that you don’t make a change to an investment that will lose the advantages. Gifting & Prepaid Funerals are other areas that might help gain a bit more pension, but be sure to check that the investment income you give up, is not more than the additional pension you might gain. Speak to your Financial Adviser to make sure.

4) Estate Planning Options

The death of a member of a couple, is hard enough to bear for the survivor, but to then also live on less income, can mean a double loss for the person grieving, & whilst Centrelink pay a bereavement payment, it is still hard to swallow. The Cost of Living for a single person is not half of the costs of a couple, it is about 1/3 less than the cost for a couple. But the change to your financial position, as a single person could mean a large drop or even a loss of pension completely, leaving only your investments to deliver your income. I have some recent clients whose cost of living fell by 1/3, but their total income dropped by 52%, leaving a large cash flow shortfall to cover from savings, & she is worried that her money might not last her lifetime.
Considering talking to your solicitor & Financial Adviser about estate planning options, just might spare some of the loss of pension, but don’t wait until death, get organised ahead of time. Implementing some advice both legal & financial saved these clients $13,416pa, & increased the value of the estate by over $170,000 over a 10 year period.

5) Hiding Assets

This one wont save you money, but it might spare you a great deal of cost & anguish. Many people have decided to not fully disclose their investments to Centrelink, in the hope of getting more pension, but now that Centrelink are data matching real time with other Government Depts, like the ATO, they are catching more people than ever before. Therefore, if you have done this, be warned you are highly likely to get caught out. You should seek advice to see what you can do if anything to mitigate the impact of having to pay back a large sum of money.

Getting good advice is the key to maximising your pension, & earning enough income to have a comfortable retirement. Call Balance Aged Care Specialists (02) 8814-7307.