Q: I have read about the changes to the Age Pension assets test which hit Age Pensioners from January 2017. My Age Pension age is 65, because I was born in June 1952, but I am still working and don’t plan to retire until I’m 67. My question is, can I pay my superannuation into my mortgage, live off my private savings and then receive the Age Pension when I retire at 67 years of age?
A: Before I answer the main part of your question, I will explain your Age Pension age comment to other readers of this response. The Age Pension is only available to those who have reached Age Pension age (now increased to 65.5 years, based on date of birth, but will eventually move to 67 years). Anyone born before July 1952, for example, born in June 1952, has an Age Pension age of 65.
Note: Anyone born after June 1952 will have an Age Pension age of 65.5, 66, 66.5 or 67 years: see SuperGuide articles Age Pension age increasing to 67 years (not 70 years) and Age Pension age now 65.5 years (66 years from July 2019).
You refer to the January 2017 Age Pension changes. The changes to the Age Pension assets test, which have been in place since 1 January 2017, has caused a lot of angst for current retirees and prospective retirees, and has meant a drop in income of thousands of dollars for a single person, or a couple (for more information on the January 2017 changes, see SuperGuide articles Age Pension: 300,000 Australians lost entitlements on 1 January 2017 and Done deal! Lost Age Pension, got new Seniors Health Card).
We are an information site rather than an advisory site so we cannot comment on the merits of a particular savings strategy or retirement strategy as a means to secure a greater Age Pension. I suggest you chat to your accountant about the implications of any action on your Age Pension entitlements, and/or perhaps the Financial Information Service (see SuperGuide article Free retirement planning assistance now available).
Note: You may also be interested in the reaction to the January 2017 Age Pension assets test changes from other SuperGuide readers,: to access these comments from January 2017, see SuperGuide article Age Pension January 2017 changes: Latest comments from readers.
Can I withdraw super to repay my debts?
Generally speaking, once you withdraw your super benefits from a super fund as a lump sum (assuming you have satisfied a condition of release – see SuperGuide article Accessing super early: 14 legal ways to withdraw your super benefits), what you do with that cash payment is your business.
If you choose to cash out all of your super benefits, spend all the cash, and then claim the Age Pension (known as ‘double dipping’), then the super rules don’t stop you. Repaying outstanding debts with your super benefits is probably a more legitimate version of the ‘double dipping’ strategy.
Note: I suggest you thoroughly research all of your payment options, including the tax implications of different options, before making any decisions.
If you’re considering such a strategy (repay debts using super and then claim Age Pension), note that you must satisfy a Centrelink income test and assets test when claiming the Age Pension, although an individual’s home is exempt from the assets test.
For more information on the Age Pension eligibility rules, see the following SuperGuide articles:
- Australian Age Pension: 10 important facts you should know
- Age Pension age now 65.5 years (66 years from July 2019)
- Retirement Age Reckoner: Discover your preservation age and Age Pension age
- Age Pension changes: More Australians entitled to payments since September 2018
- Latest Age Pension rates (since September 2018)
- Australian Age Pension: Am I eligible and how do I apply?
- Age Pension: Assets test thresholds applicable since September 2018
- Age Pension: Income test thresholds applicable since September 2018
- Age Pension income test: Deeming rates and deeming thresholds
- Age Pension: Is my super benefit counted towards the assets test, or income test?
- Age Pension: Are you eligible for the Work Bonus?
- What assets count for the Age Pension assets test?
- Income test changes (January 2015) mean less Age Pension forever
- Age Pension income test change hits funded defined benefit pensions
- Age Pension: Does my superannuation lump sum count for income test?