Australian pension qualification query

[Stulatics]

Hi all,

Hope you are going well.

I am a Pom (single, in my 40s) thinking of heading back to UK to live for good in a couple of months. I have been residing in Australia (apart from a few holidays) since February 2009 after coming here on a one-year visa. After much faffing on bridging visas, I got 457 in 2012, PR in 2016 and became an Australian citizen in 2018.

I know about the 10-year residency qualifying rule for the Australian pension. My question is: does the 10 years count as when you first came here or when you got PR? Does residency count from when you first came here? If it's 10 years from PR then I may delay my plans to return home...

I am going to double-check any answer(s) with Services Australia but any info/thoughts/assistance here initially please would be much appreciated!

Cheers,

Stuart.

[Marisawright]

1 hour ago, Stulatics said:

I am a Pom (single, in my 40s) thinking of heading back to UK to live for good in a couple of months....

I know about the 10-year residency qualifying rule...

Unfortunately, it won't matter whether you qualify for the 10 year period or not.  If you leave Australia now, you can't claim your Australian pension from the UK.  You'll have to revert to the UK pension.  So you might want to investigate back-paying the years you missed. 

[Stulatics]

11 hours ago, Marisawright said:

Unfortunately, it won't matter whether you qualify for the 10 year period or not.  If you leave Australia now, you can't claim your Australian pension from the UK.  You'll have to revert to the UK pension.  So you might want to investigate back-paying the years you missed. 

Thanks for the reply. Do you have a source for this answer please?

[Skani]

16 minutes ago, Stulatics said:

Thanks for the reply. Do you have a source for this answer please?

You need to be an Australian resident and in Australia when you claim the Australian pension:

Residence rules for Age Pension - Age Pension - Services Australia

This is in addition to the income and assets tests to qualify for a pension or part pension.

[Stulatics]

11 hours ago, Skani said:

You need to be an Australian resident and in Australia when you claim the Australian pension:

Residence rules for Age Pension - Age Pension - Services Australia

This is in addition to the income and assets tests to qualify for a pension or part pension.

Thank you so much for the help, this is such a great community! I guess therefore if I came moved back here in the future (which is a possible), I would need to do it at least three years before you are eligible to claim the pension here to ensure I am definitely eligible (as I would have been residing here at least 10 years and be a citizen?).

[Skani]

For anyone born after 1 January 1957 the current pension age is 67.  If you are in your forties now  you won't be eligible for another 20+ years.  It's impossible say what the rules will be then with respect to eligible age and  residency rules (or other income or assets for that matter).   I doubt that they would be any more lenient and they could well be more onerous.  The only improvement may be if Australia and the UK reinstate special arrangements for pensions - but I wouldn't hold your breath.

As it stands at the moment the Department can also look at other factors if they are dubious about a genuine residency claim:

"When we’re deciding whether you live in Australia, we’ll look at the following:

• where you live and who you live with
• if you have family in Australia or overseas
• your employment, business or financial ties in Australia and overseas
• your assets in Australia and overseas
• how often and how long you travel outside Australia
• anything else we think is relevant."

Any Australian pension  eligibility will be affected by your UK pension anyway. If you are returning to the UK I'd concentrate on maximising your pension entitlements there, then review your situation closer to retirement age.

[Marisawright]

12 hours ago, Stulatics said:

Thank you so much for the help, this is such a great community! I guess therefore if I came moved back here in the future (which is a possible), I would need to do it at least three years before you are eligible to claim the pension here to ensure I am definitely eligible (as I would have been residing here at least 10 years and be a citizen?).

As Skani says, it's hard to know what the situation will be.  If you look around the world, many countries are raising retirement age and increasing the requirements to qualify for a pension, so I would expect Australia to follow suit at some point.  

It's important to remember that in Australia, the pension is not something you pay into, like the British pension.  It's not a right.  It's a welfare benefit, same as unemployment benefit, intended only for people in need.  If you have a certain amount of income or assets, you won't get it (and of course, the threshold is reviewed regularly).  

That's why backpaying the UK pension may be a good idea. If you log on to HMRC website, you can see which years you've missed and work out whether it's worth paying them now.  

Tip:  you can't withdraw your superannuation, and you certainly shouldn't contribute any extra to it if you're leaving the country for good.  First thing to do is make sure all your super is in one fund and that it's a good fund (there are some awful ones out there, especially the ones run by the banks).   It's very very easy to switch funds, so get that done and completed before you leave (it's basically just a case of contacting the fund you like and they'll sort it).  

Once you're settled in the UK, write to your super fund and let them know your new address.  Also instruct them to cancel all insurances (they're probably not valid overseas anyway).  That will minimise your fees, and ensure that your balance can sit there and keep increasing nicely until retirement age.

[Stulatics]

12 hours ago, Marisawright said:

As Skani says, it's hard to know what the situation will be.  If you look around the world, many countries are raising retirement age and increasing the requirements to qualify for a pension, so I would expect Australia to follow suit at some point.  

It's important to remember that in Australia, the pension is not something you pay into, like the British pension.  It's not a right.  It's a welfare benefit, same as unemployment benefit, intended only for people in need.  If you have a certain amount of income or assets, you won't get it (and of course, the threshold is reviewed regularly).  

That's why backpaying the UK pension may be a good idea. If you log on to HMRC website, you can see which years you've missed and work out whether it's worth paying them now.  

Tip:  you can't withdraw your superannuation, and you certainly shouldn't contribute any extra to it if you're leaving the country for good.  First thing to do is make sure all your super is in one fund and that it's a good fund (there are some awful ones out there, especially the ones run by the banks).   It's very very easy to switch funds, so get that done and completed before you leave (it's basically just a case of contacting the fund you like and they'll sort it).  

Once you're settled in the UK, write to your super fund and let them know your new address.  Also instruct them to cancel all insurances (they're probably not valid overseas anyway).  That will minimise your fees, and ensure that your balance can sit there and keep increasing nicely until retirement age.

Hi,

Thanks so much for the helpful replies, really appreciate the time and thoughtfulness! I was a bit stressed out about the pension stuff, on top of the other things you have to plan when you are leaving Oz. 

Yeah, I have made sure I have consolidated my super into one account (I had a couple going via different employers). 

I will investigate the backpaying pension, seems good info.

Thank you again guys!

Stuart.

 

[InnerVoice]

On 25/02/2023 at 21:10, Skani said:

You need to be an Australian resident and in Australia when you claim the Australian pension:

Residence rules for Age Pension - Age Pension - Services Australia

This is in addition to the income and assets tests to qualify for a pension or part pension.

I have a quick question regarding the residence rules for claiming Aged Pension. It states on the above page that for at least 5 of these (10) years, there must be no break in your residence. I've been an Australian resident for well over 20 years, so I meet the 10 year requirement. However, I've taken overseas holidays every couple of years since I arrived, so technically my feet have never been on Australian soil for 5 years uninterrupted. I assume the term 'residence' means 'normally resident', as it does for tax purposes? I'd hate to rock up to Centrelink 10 years from now for them to say "Computer says No!"

My other question, along the same lines, is how can you be overseas and still be considered an Australia resident?

[Marisawright]

45 minutes ago, InnerVoice said:

I have a quick question regarding the residence rules for claiming Aged Pension. It states on the above page that for at least 5 of these (10) years, there must be no break in your residence. I've been an Australian resident for well over 20 years, so I meet the 10 year requirement. However, I've taken overseas holidays every couple of years since I arrived, so technically my feet have never been on Australian soil for 5 years uninterrupted. I assume the term 'residence' means 'normally resident', as it does for tax purposes? I'd hate to rock up to Centrelink 10 years from now for them to say "Computer says No!"

My other question, along the same lines, is how can you be overseas and still be considered an Australia resident?

Yes, I am pretty sure it means "normally resident".  Holidays don't count.  

Not sure about your other question.  I don't think you can be overseas and still be considered an Australian resident, other than when you're on holiday.

The reason they say you must be "an Australian resident AND in Australia' is that it's not enough to just be in Australia.  You must also have an established home here.

Edited April 4, 2023 by Marisawright

[InnerVoice]

23 minutes ago, Marisawright said:

Yes, I am pretty sure it means "normally resident".  Holidays don't count.  

Not sure about your other question.  I don't think you can be overseas and still be considered an Australian resident, other than when you're on holiday.

The reason they say you must be "an Australian resident AND in Australia' is that it's not enough to just be in Australia.  You must also have an established home here.

Was just wondering at what point you'd no longer be considered to be 'on holiday' - 1 month, 2 months... 6 months? How about those who go backpacking for a year or more?

[Marisawright]

38 minutes ago, InnerVoice said:

Was just wondering at what point you'd no longer be considered to be 'on holiday' ....How about those who go backpacking for a year or more?

Good question. I had a browse around the Centrelink site and it's all a bit vague.  If you're receiving a pension or benefit, you must tell Centrelink you're going overseas and why you're going. One of the reasons you can choose is "holiday" but it doesn't set any limits on how long that can be.  It does say that if you can't specify your return date, it will affect your payments.  

All that aside, have you estimated whether you'll be eligible to get the pension in 10 years' time anyway?  Remember it's means-tested, so if you have too many assets, you won't get the pension anyway until you've run down your assets later in life.  Your superannuation counts as an asset.

Edited April 4, 2023 by Marisawright

[Skani]

50 minutes ago, Marisawright said:

...have you estimated whether you'll be eligible to get the pension in 10 years' time anyway?  Remember it's means-tested, so if you have too many assets, you won't get the pension anyway until you've run down your assets later in life.  Your superannuation counts as an asset.

Also keep in mind that your spouse's income is included in your income eligibility.  (From memory you said she was considerably younger than you?)

[InnerVoice]

2 hours ago, Marisawright said:

All that aside, have you estimated whether you'll be eligible to get the pension in 10 years' time anyway?  Remember it's means-tested, so if you have too many assets, you won't get the pension anyway until you've run down your assets later in life.  Your superannuation counts as an asset.

That would depend on when I chose to retire. A few months ago I'd been thinking about pulling the plug in July and taking the 25% lump sum from my UK private pension. It would keep me going until I could access my Aussie super, which in turn would last until I was about 70 - maybe a bit longer if the stock market improves. Given the current state of the economy and the cost of living I'm now tempted to keep working until my wife gets her Aussie Citizenship, which will hopefully be within the next two years. If we moved to Europe for a few years it would definitely be the end of my working life, so it might be prudent to stick in another couple of years while we're still here.

 

1 hour ago, Skani said:

Also keep in mind that your spouse's income is included in your income eligibility.  (From memory you said she was considerably younger than you?)

That's right, 15 years younger. Fortunately or unfortunately, she doesn't earn much, and based on the figures I put into the Centrelink calculator it doesn't look like they'd dock me much at all. It's be 10-12 years from now of course, so it could all change in the meantime.

Edited April 4, 2023 by InnerVoice

[rammygirl]

Just to say the 25% lump sum will not be tax free in Australia.

[Marisawright]

17 hours ago, InnerVoice said:

That would depend on when I chose to retire. A few months ago I'd been thinking about pulling the plug in July and taking the 25% lump sum from my UK private pension. It would keep me going until I could access my Aussie super, which in turn would last until I was about 70...

As someone who's approaching 70, I'd hate to be in a position right now where I was facing the rest of my life surviving on the aged pension alone.  No more holidays, no more meals out, giving up hobbies that cost money -- no thank you.  At 70, unless you're very unlucky, you'll feel exactly the same as you do right now.  Bits may creak here and there but you'll still want to do exactly the same activities as you do today.  Could you afford your current lifestyle on the state pension?

Edited April 4, 2023 by Marisawright

[Bobj]

4 hours ago, Marisawright said:

  Could you afford your current lifestyle on the state pension?

The trick is to live where holidays are normally every day Or, to put it another way; live where you can enjoy your hobbies and pastimes....I live in the Whitsunday area and have been retired for 25 years...Think of all those lovely coral trout!

Cheers, Bobj

[InnerVoice]

3 hours ago, Marisawright said:

As someone who's approaching 70, I'd hate to be in a position right now where I was facing the rest of my life surviving on the aged pension alone.  No more holidays, no more meals out, giving up hobbies that cost money -- no thank you.  At 70, unless you're very unlucky, you'll feel exactly the same as you do right now.  Bits may creak here and there but you'll still want to do exactly the same activities as you do today.  Could you afford your current lifestyle on the state pension?

When to retire and how much one needs is the $64,000 question right now, which is coincidental given that $64,000/year is pretty much what we'd need to maintain our current lifestyle. They say you need about two thirds of your income in retirement, so $45k/year should just about do it once we sell the place in Cairns and no longer have a mortgage.

I respect your viewpoint from someone who's approaching that age, although I imagine that our outgoings for entertainment etc are significantly less. We eat out 3 times a year (our respective birthdays and wedding anniversary), and we don't have expensive hobbies. My wife's favourite hobby is cooking so that's one of the reasons we don't eat out - that, and we are often disappointed by what's served up. I'm very outdoorsy and why I love the Aussie lifestyle. I run, hike, bike, swim and kayak, all of which cost very little given that I already own the equipment. My gym membership is probably my biggest outgoing in that respect, currently $15/week. Travel has always been my greatest passion and it's getting expensive these days, but it isn't as important since we got married. I've visited 56 countries so far and I used to pride myself on having visited one for every year I was old, but due to the pandemic I'm three behind now. Hopefully, if we get to live in Europe for a few years I'll catch up as there are plenty of countries over there I haven't visited yet - not that I'm taking this quest too seriously!

70 is just over a decade away for me and would be longer than my father lived, so that's always in the back of my mind. If I make it that far and have exhausted all my Centrelink deemed assets, I'd receive a pension of $32k/year based on current figures and exchange rates ($20k AUS Aged pension and $12k UK state pension). My wife will be in her mid-50s and if she was working part-time and earning $25k/year, I'd still be getting $25k from my state pensions. $50k/year would seem like a decent amount to live on, even 10 years from now - assuming we cut right down on the holidays. There's no reason why I couldn't do a bit of part-time work of course - it'd probably keep me out of mischief.

I'm pleased to hear that at 70 I shouldn't feel too much different to being 60. There's something to look forward to! 

Apologies @Stulatics for hijacking your post - hopefully you're getting some useful info from this too.

[InnerVoice]

12 hours ago, rammygirl said:

Just to say the 25% lump sum will not be tax free in Australia.

Thanks, I was aware of that. I was thinking about taking out the equivalent of $45,000 so that the maximum tax I'd pay would be 19c in the dollar, or $5,092 in total.

Assuming I had no other income for the tax year, wouldn't that be right?

[InnerVoice]

19 minutes ago, Bobj said:

The trick is to live where holidays are normally every day Or, to put it another way; live where you can enjoy your hobbies and pastimes....I live in the Whitsunday area and have been retired for 25 years...Think of all those lovely coral trout!

Cheers, Bobj

Totally, that's exactly what we intend to do, and why we'd been considering Tasmania (lots of walks and places to explore). That said, the Whitsundays would take some beating too - we were there 18 months ago and had a ball!

[Marisawright]

28 minutes ago, InnerVoice said:

I'd receive a pension of $32k/year based on current figures and exchange rates ($20k AUS Aged pension and $12k UK state pension).

I assume you included the 12k UK state pension when you put your figures in the AUS pension calculator?   

You certainly do have fewer expenses than us.  What surprised us is how much the cost of living has risen in the 15 years since we gave up full-time work.  I think when you're working, you notice inflation much less.

[Parley]

I would go and see a financial adviser if i was you. 

I don't think it is a good plan to run out of money by the age of 70. You probably still have another 15 years or more to live at that age.

If you are able to live in a paid off home in retirement, that should be a non negotiable goal in my opinion.

[Parley]

Also I'm sure you want to leave some money for your wife when you die.

Spending it all on trips is no good if you  leave her penniless when you die.

[InnerVoice]

1 hour ago, Marisawright said:

I assume you included the 12k UK state pension when you put your figures in the AUS pension calculator?   

You certainly do have fewer expenses than us.  What surprised us is how much the cost of living has risen in the 15 years since we gave up full-time work.  I think when you're working, you notice inflation much less.

Yes, I did. The full aged pension for an eligible pensioner (home-owning couple) is $20,852/annum, so my UK state pension would only reduce that by $850 - it works out pretty well. I know a couple of people in retirement who are only getting the aged pension and they keep on working part-time, but in both cases the other partner hasn't retired yet and I think it's mainly because they're bored. My part UK state pension should plug that gap nicely, assuming they don't dramatically change all the rules in the next 10 years!

You're right about the cost of living here. When I migrated back in the 90s it was as cheap as chips compared with the UK, and I think oil skyrocketing is the main culprit as the economy here is so dependent on it.

[InnerVoice]

1 hour ago, Parley said:

I would go and see a financial adviser if i was you. 

I don't think it is a good plan to run out of money by the age of 70. You probably still have another 15 years or more to live at that age.

If you are able to live in a paid off home in retirement, that should be a non negotiable goal in my opinion.

I have an IFA and my last annual forecast indicated that my UK private pension and Aussie super would last until I was 75, but I was being conservative saying 70 given the current state of the economy and inflation. We currently live a 4 bed 2 bath place with a swimming pool so we'll definitely be downsizing within the next three years, and when we do we'll be mortgage free. That's a non-negotiable in my opinion too.

24 minutes ago, Parley said:

Also I'm sure you want to leave some money for your wife when you die.

Spending it all on trips is no good if you leave her penniless when you die.

I left school at 15 and have worked almost as many years as my wife is old, so I think I'm entitled to spend at least some of my money on things I'd like to do. She'll get the house of course and she has her own super, which given the age difference she may not even have touched by the time I die.