Nick Bruining Q+A: What to do if you want to stop work soon and draw down a pension from your superannuation

Question My husband is receiving a part aged pension, due to me still working. He is older than I am and I have two years to go until I’m old enough to receive a pension. I have a transition to retirement account with my super. I would like to stop work soon and draw down a pension from my super. How does this work and can you offer any other suggestions? Answer As your employment income is affecting your husband’s age pension, we can safely assume that his pension payment is being affected by the Centrelink income means test. In addition to your pre-tax income from employment, Centrelink will be including the deemed income from all of your financial assets, which will include money in the bank, shares, managed investments, cash, bullion and the balance of your transition to retirement account-based pension (ABP). As you have already reached the age of 60, when you cease any employment and notify your super fund, the status of the money in the ABP will change from a transitional arrangement to an unrestricted “normal” ABP. While you will still be required to draw down the minimum amount of either 4 per cent or 5 per cent of the June 30 account balance depending on your age, there will be no upper limit to the amount you can access. You will also see slightly higher investment returns because the 15 per cent tax on the fund’s earnings will disappear. If you and your husband’s total assets at the time you cease work exceed $451,500, his pension will continue to be affected but in this case, the Centrelink asset means test will apply. If you are non-homeowners, a higher limit of $693,500 will apply. One strategy to get you under the threshold and your husband the full rate of age pension, is to move some, or, all of the ABP money back into superannuation accumulation phase. The downside of this is that a 15 per cent tax on earnings will apply but this is no different to your current arrangement using a transition to retirement ABP. With your money back in accumulation phase, your husband could become entitled to half the couple’s maximum pension payment which is currently $826.70 a fortnight or $21,494.20 per annum. Money held in accumulation phase will be ignored by Centrelink until you reach pension age. You could either keep some of the money in an ABP and top-up your husband’s pension with those payments or, you could simply make lump sum withdrawals from super as required. You could also do a combination of the two approaches. Because you are over 60, no tax is payable on any money withdrawn. Got a question for Nick? Email yourmoney@thewest.com.au or write to us at Your Money, GPO Box D162, Perth WA, 6840. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association