The amount of money you receive from the age pension you receive depends on your age, wealth and income. It can be affected by the amount of money you have in your bank account as well as in your super fund.
For example, if you are a single homeowner you can get a full pension with an asset limit of $270,500. As a couple with a home and combined assets your limit is reached at $405,000 to receive a full pension.
The asset value limit is the amount of assets a person can own before their pension or payment will reduce from the maximum rate under the assets test. Example: Currently the asset value limit for a single service pension homeowner is $280,000 and for a single service pension non-homeowner is $504,500.
A single person who has no other means can have capital of up to € 40,999 and qualify for the maximum rate of pension of € 237.00 per week.
If you retire early, or stop work due to redundancy, ill-health or other reasons, your State Pension and other pensions you're entitled to may be affected. You need to know all your pension options to make sure you'll have enough to live on in retirement.
Contrary to popular belief, Centrelink does not in fact have access to your bank account and doesn't monitor it when working out your payment rate. Instead, the rate of payment you receive from Centrelink is based on the assets and any work income you specified the last time you gave them your financial information.
In addition to funds received that are held in a financial investment, the value of insurance or compensation payments that have been applied to build, repair or renovate the building or plant can be exempt from the assets test.
Centrelink has very wide powers to thoroughly investigate deposits that have been made into your account. For example, it has the power to obtain your information from other government agencies as well as accessing information from banks, building societies and credit union accounts.
You and your partner must have no more than $5,000 in combined readily available funds. This includes any liquid assets you can sell. Liquid assets include cash you have on hand, money you have in the bank and financial investments you have.
Each time you take a lump sum of money, 25% is tax-free. The rest is added to your other income and is taxable. The remaining pension pot stays invested. This means the value of your pension pot and future withdrawals aren't guaranteed.
You may lose your pension if the company that sponsors the defined contribution plan terminates the plan. However, in some cases, you may be able to receive benefits from the Pension Benefit Guaranty Corporation (PBGC), a federal agency that insures certain types of pensions.
If you take a lump sum amount from your pension and spend it quickly then apply for benefits, you might not be eligible because the money you've taken from your pension could be counted as 'notional capital' - this means it's counted as capital when working out if you're eligible for benefits.
Emergency Funds for Retirees
Despite the ability to access retirement accounts, many experts recommend that retirees keep enough cash on hand to cover between six and twelve months of daily living expenses. Some even suggest keeping up to three years' worth of living expenses in cash.
$5,500 if you're single with no dependants. $11,000 if have a partner or you're single with dependants.
Having 3-6 months' worth of living expenses is a common rule of thumb and one I like for many retirees.
You do need to lodge a tax return if: Centrelink is withholding any tax from your aged pension payment. If Centrelink does withhold tax from your aged pension payment; this will be noted on your PAYG summary. If there is any amount of tax withheld listed on your PAYG summary, then you should lodge a tax return.
Just because the inheritance is exempt from the income test, it doesn't mean that it won't affect your pension payment. What you do with the inheritance may still affect you under the income and/or assets test. If you spend the money on an exempt asset, it won't affect you under the assets test.
A quarter (25%) of the value of most pension schemes can be converted into tax-free cash when the pension starts to be paid. This is the same for trivial commutation lump sums. A quarter (25%) will be free of tax and the remaining three quarters (75%) will be taxable as normal income in the year in which it is paid.
Can I Get the Pension if I Have Super? Having superannuation savings does not deny you from receiving Age Pension payments. Eligibility for the Age Pension is based on an Assets Test and an Income Test.
If you are just planning on spending the money that you withdraw, what you spend it on is important for Centrelink to know. If, for example, the money was spent on maintenance or capital work around the family home, it would not be assessed, as the family home is exempt from means testing.