Ok this is a big one! Oz Pensions/Superannuation

[whoiam]

I have tried reading up on this as much as i could--but i understand there are many on here who can possibly explain a bit better and clarify a few queries!

 

Here in the Uk there is a state pension and then you get any occupational pension if you've worked etc etc.

 

What about in Oz land?

 

I've seen that when you work you get to contribute to a super fund--which you can choose or you can even manage your own. But as I see it these super funds are private initiatives run by private companies.

 

Now these are my queries--

 

1. What if a person never worked or has worked only for a short while--what happens then?

2. Is there a government provision for pension for all above a certain age???

 

 

Would be glad if any one who knows anything about the Oz pension system can post what they know--because this could be helpful for those coming after me as well.

Many thanks in advance!

[Guest The Pom Queen]

Andrew is the expert on pensions so I've moved your thread where he can see it

[Andrew from Vista Financial]

Hi

 

 

Australia also has an state pension system know as the Centrelink Age Pension see here for eligibility http://www.humanservices.gov.au/customer/enablers/centrelink/age-pension/eligibility-for-age-pension

 

In general someone has to be a permanent resident/citizen and have lived in Australia for 10 years as a perm/citizen to be eligible.

 

 

However the system works differently to the UK.

 

The pension benefits that are received are based on a means testing system.

 

A persons/couples assets are tested, such things as cash in the bank, investment properties, pension balance, vehicles etc (generally own home excluded).

 

Then an income test applies, so again things like private pension income, income from investment properties, income/interest from cash in the bank etc.

 

 

Based on the testing whatever produces the lowest result is the amount that is received.

 

There is a certain asset and income threshold that is allowed before the Age Pension is reduced.

 

 

Can be a bit complicated, so here is an example for a couple who are homeowners who have:

 

 

 

 

• $10,000 worth of house contents;
  
• $10,000 car;
  
• $10,000 in the bank.
  

 

 

 

This couple are under the asset and income test threshold which is currently $265,000 in assets and $6,864 in annual income so would receive the maximum Age Pension.

 

Assuming both are eligible for the Age Pension they would currently receive approximately $29,614 annually.

 

 

 

If we take the same couple for another example but this time they have:

 

 

 

• $10,000 contents;
  
• $50,000 cars;
  
• $100,000 in bank;
  
• $300,000 investment property with $15,000 rental income;
  
• $250,000 Account Based Pension with $10,000 taken in income;
  

 

 

 

The assets test would give them $12,259 annually and under the income test they would receive $22,609 annually.

 

As the income test produces the lowest result then the annual Age Pension they would receive is $12,259 annually.

 

 

 

 

 

Hopefully this gives some idea.

 

 

However it is very beneficial taking retirement advice as there are strategies available that can be implemented to optimse the outcome i.e legal loopholes

 

 

Kind regards

 

 

Andy

[MARYROSE02]

I'm familiar with many aspects of the pension scheme but I'm still not sure what actually happens to the money I've been paying into my private super scheme when I actually retire? Do I get a pension from that particular fund based upon how much money I have in the fund?

 

I'm also rejoining the Commonwealth Public Service and waiting to hear if I can also rejoin the Com Super scheme I've been drawing a pension from for the last sixteen years.

[whoiam]

Thank you Andrew. Guess that wouldn't give much for someone who hasn't a private super to supplement! Pity stay at home mums!

[Andrew from Vista Financial]

I'm familiar with many aspects of the pension scheme but I'm still not sure what actually happens to the money I've been paying into my private super scheme when I actually retire? Do I get a pension from that particular fund based upon how much money I have in the fund?

 

I'm also rejoining the Commonwealth Public Service and waiting to hear if I can also rejoin the Com Super scheme I've been drawing a pension from for the last sixteen years.

 

 

 

That will depend on the type of Super Fund that it is, Defined Benefit or Accumulation.

 

If it is a Defined Benefit Scheme (I gather the Com Super Scheme is) then generally you will be paid an income stream for life that is indexed to CPI.

 

The income received is usually calculated by a number of factors including things like, years of service, average salary etc etc

 

However these Schemes are few and far between now.

 

If it is an Accumulation Scheme then you have options.

 

Essentially these are (once a condition of release is met):

 

 

 

 

• Draw the entire amount out as a lump sum;

• Take lump sum withdrawals as required with the remainding balance invested;

• Roll to an Account Based Pension (this can be advatageous for Centrelink Age Pension) and take an Income Stream (a minimum amount applies) with the remaining balance invested along with the ability to draw lump sums as required.

 

 

 

 

Therefore with Accumulation Schemes what you get at retirement is based upon the balance at that time which has been built up via contributions into the fund and earnings of the fund.

 

Generally when taking funds as either lump sum or income streams from Superannuation Funds/Account Based Pensions after the age of 60 they are tax free.

 

Hope this helps.

 

 

Regards

 

 

Andy