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Tracey Spicer talks to Regan Welburn from Marathon Financial Planning about how to maximise your Age Pension and other concessions available for seniors.
Hi, I’m Tracey Spicer. We’ve talked a lot about superannuation in recent weeks, but we haven’t delved deeply into the Age Pension. And I’m about to talk to one of Australia’s experts in this area. Regan Welburn is the father of two small children, is a runner, and that’s why his company’s name is Marathon Financial Planning. Regan, thanks for joining us.
Thanks for having me, Tracey. It’s lovely to speak with you.
Let’s start with the absolute basics. How is the pension actually calculated?
Sure. So in Australia, not everyone gets the maximum rate of pension. There is a safety net principle. So I guess that allows people with less in assets and income to get more in support from the government and vice versa. So the more you have in assets and income, the less you get from the government and the more you have to rely on your own personal savings and your superannuation to top up to where you need to be as far as cashflow or your budget is concerned.
So what are the current payment rates and how have they kept up with cost of living in recent years?
Sure. So the maximum rate of pension at the moment for couples is approximately $37,000 a year. And for singles it’s around about $24,000 a year. Those payments are indexed twice a year. And there’s also an increase to the income and asset limits, which in turn effectively gives you three increases to your pension every single year.
With the Association of Super Funds Australia, they say for a comfortable lifestyle in retirement, couples need around about $62,000 a year. And for singles it’s around about $43,000-$44,000 a year.
So there is a bit of a gap between what the government provides in Age Pension, but then the comfortable lifestyle in retirement. And I guess that’s why there’s a few incentives in place for people to save for their retirement so that they can bridge that gap between a comfortable lifestyle and what the Age Pension gives them.
Yes, an awful lot of people on a pension who are living in poverty. Based upon that, what are some of the tips that you would give to people to maximise their pension entitlements?
So I think the important thing to maximise your pension is that you don’t know what you don’t know, first of all. So seek the advice of a professional or someone that works in the industry to ensure that they help you navigate the confusing system, whether that be a financial adviser or even if it might be a son or daughter that can assist with you applying for the pension. But then maintaining your record on an ongoing basis.
Because the pension works like a safety net, over time, as your financial situation changes, you must advise Centrelink and that will allow your pension to increase if your assets have reduced or potentially decrease, if your assets have increased.
So my tips to maximise the pension is, first of all, use the Payment Finder on the Services Australia website. I think there’s over 60 payments and supplements available from Centrelink at the moment. So it’s really hard to know where to start. The payment finder is just an amazing resource where you can into some of your own details. And it works a little bit like a triage system, it will come out with maybe 5 or 10 different payments that you may be eligible for based on the information that you’ve provided.
So that’s a really good starting point because there’s so many different weird and wonderful payments that a lot of people just aren’t aware of. And you won’t receive the support if you don’t ask for it. So I think that’s a really great place to start.
The tips for, for people who are getting a part pension. So their rate of payment is affected by either their assets or their income. Updating Centrelink with your current situation. So your car valuations, your home contents, your bank balances, because as your assets reduce your rate of pension increases and the more heavy lifting you can get your pension doing, the longer your own retirement savings are going to last.
So when you update your assets, if your assets are reduced by more, let’s say they’ve reduced by $10,000, you’re up for an increase in pension of $780 a year. That’s quite a lot, given the fact that if you were to invest $10,000 in a bank account at the moment, you’d probably be lucky to get $100 a year in interest at an interest rate of 1%. So by getting the Age Pension to do the heavy lifting, it will make a difference on your overall cash flow. So correcting your asset valuations, spending money on your own home.
So the family home is exempt from your Age Pension assessment. So if you’re spending money on home improvements, then your bank accounts will reduce, but your Age Pension will in turn increase. Things like holidays, gifting – you’re allowed to give away a certain amount of your money and that will help also increase your Age Pension.
And a big strategy that the financial industry looks at is taking advantage of your younger spouse. So it’s curious, but in Australia, if you have a younger spouse that’s below Age Pension age, their superannuation is exempt from your Age Pension assessment.
So if I’ve got a younger wife, we can look at investing a lump sum of money into her superannuation. That will be hidden, I guess, sheltered from my Age Pension assessment until she catches up to Age Pension age. So during that period of time whilst we’re waiting for her to catch up, I will benefit from a higher rate of Age Pension.
It’s important to seek professional advice around that strategy because there’s tax considerations, Centrelink, there’s liquidity, having access to funds. You may not be able to access the funds if you invest them into super. So definitely getting the right advice around that is important.
There are also other Centrelink-friendly income streams like lifetime annuities, which can pay you for the rest of your life, and Centrelink incentivises that because it counters the longevity risk, that risk of running out of money before you die. So there’s plenty of different options available to ensure that you are maximising your Centrelink entitlements along the way.
There’s so much more to it than I realised. I’m going to get my dad onto all of this. Thank you very much Regan. What about things like concession cards and the benefits that come from them?
Really important. So if you’re on an Age Pension, then you automatically receive the Pension Concession card, which I guess is the rolled gold concession card – that gives you concessions on your gas, water, electricity, council rates, car registration – a number of other discounts. So that’s the top standard.
But there are other options available if you do not qualify for a pension. So if you’ve got too many assets or too much in the way of income, then there are two other cards.
One of them is called the Low Income Health Care card, and the other is called the Commonwealth Seniors Health Card. Two different assessments. And they both come with different benefits associated to those cards. But you can actually receive both cards at the same time as well. So I guess what I’m saying is that if you don’t qualify for a pension, it’s still worthwhile investigating what other options you have because those concession cards can save thousands of dollars a year.
Even for some clients that I’ve assisted, they’ve been selling the house and downsizing. And in Victoria, stamp duty is quite high. But if you have one of the three concession cards, you save an absolute fortune in stamp duty, tens of thousands of dollars.
So it may not be the monetary benefit of an ongoing Age Pension, but the associated discounts that come with the concession cards are huge.
If someone’s watching this and thinking, gosh, I do need to go down and apply for an Age Pension now or in the future, can they do it over the phone or online or do they have to go to Centrelink offices?
Our preferred method now is for people to claim online, and I understand that that can be daunting for some people, but it’s definitely worth the effort. And even if it’s not you personally that uses the MyGov account, you can engage the services of a nominee or a financial adviser to help navigate that process.
And if someone is looking at applying for the Age Pension, all they’ll need to do is apply for a MyGov account to begin with. And MyGov is I guess the one overriding portal for all different government services. So you have Centrelink, the Tax Office, Medicare, all in this one place.
And once you’ve got a MyGov account up and running and that’s linked to Centrelink, you simply just click claim a payments and you go through and you complete the personal details section. You fill in your financial situation because obviously that’s how your rate of payment is determined, and then you just upload the evidence required to support that claim. So that might be a bank statement, a superannuation statement and any other details that Centrelink required.
So it sounds daunting and I guess we just don’t do it every day, but it is actually a fairly simple process and it’s getting a lot easier as time goes by.
This is invaluable advice. Thank you so much, Regan.
Thank you, Tracey. Appreciate it.
Regan Welburn is the founder of Marathon Financial Planning. Regan previously worked for Centrelink as a Financial Information Service Officer and has an intricate knowledge of the Social Security system.