Come retirement, many folks rely on a combination of their superannuation savings and the age pension in order to financially sustain them moving forward. Accordingly, a front-of-mind issue for individuals is: at what point does your level of superannuation savings and payments impact your eligibility for the age pension?
While you are under age pension age, in relation to any Centrelink payment, Centrelink do not count your or your partner’s superannuation balance in either the income or assets test if your fund is not paying you a superannuation pension. However, if your fund is paying you a superannuation pension, that pension is taken into account.
Once you reach age pension age, Centrelink counts your super both (a) in the assets test and (b) in the income test under the deeming rules. The same rules apply to your partner and their super when they are age pension age, even if they are not in receipt of a Centrelink payment.
To recap, deeming is a set of rules used to work out the income created from your financial assets. It assumes these assets earn a set rate of income, no matter what they really earn. The main types of financial assets are:
- savings accounts and term deposits
- managed investments, loans and debentures
- listed shares and securities
- some income streams
- some gifts you make.
Centrelink includes any deemed income as your income under the income test. The income test helps Centrelink work out how much income support it can pay you.
Taking money out of superannuation doesn’t affect your Centrelink payments but you may be impacted by the deeming rules (see earlier) depending on where that money is invested outside super.
Recent research into retirement confidence by Monash University found people aged 50 and over – who take time to understand and plan their finances – are less anxious about transitioning into retirement. It found they were more confident overall about their retirement options.
Knowing how much of the age pension you could be eligible for can help you understand your finances in retirement. For many, a qualified financial adviser with knowledge of superannuation and retirement planning can help you get the balance right.