How to keep your assets and get the age pension
HAS your age pension been reduced a lot or even stopped altogether since January 1?
Until recently there was very little that could be done except reduce your assets to get the age pension back. Reducing your assets is usually not a good idea at all so most people were stuck and had to live with the change.
However, there is a way to keep your assets or only reduce them slightly AND get the age pension back earlier or receive a higher age pension over time.
It is not an immediate remedy, but one that could be well worth investigating depending on your personal circumstances.
For homeowner couples with assets of $500,000 to $900,000 or single homeowners with $250,000 to $600,000, it is a good idea to look at a new type of lifetime annuities - ones where you can get all or much of your money back for up to 15 years.
What is a lifetime annuity and why and how does it work?
With a lifetime annuity you pay a lump sum, typically $50,000 to $250,000, to a provider and the provider then pays you a fixed amount for the rest of your life in return.
There are a few variations to annuities with different features. The one we are interested in is the lifetime option as you can ask for much or all of your money back for up to 15 years.
A lifetime annuity can increase your age pension because Centrelink treats lifetime annuities differently from all other assets: Centrelink reduces the value of the annuity in its calculations every year which means Centrelink thinks that you have fewer assets every year and gives you a higher aged pension. Since you can get much or all of your annuity lump sum back for as much as 15 years, you have the best of both worlds: You have your assets and your age pension increases.
Annuities in general are a very safe form of investment which normally means you don't get high returns, similar to term deposits, though annuities are slightly less conservative than term deposits.
What makes lifetime annuities currently so attractive is not just the investment return one gets but the extra boost for a lot of people from their increased age pension. The normal return in combination with the extra age pension make it particularly interesting.
Please contact me if you would like to know more.
Christoph Schnelle (email@example.com) is the principal of In Your Interest Financial Planning Pty Ltd and Auth Rep 308223 of FYG Planners Pty Ltd AFSL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances.