Our $900,000 share portfolio keeps rising. How do we save our pension?

My parents are in their 90s and receive a part age pension payment. They have a share portfolio consisting of bank stocks of approximately $895,000. With the market going up as it has, they are worried that they will lose their pension and the benefits. Is there anything that they can do so they don’t lose the pension?

Homeowner couples can have total assessable assets of $1,045,500 before the pension cuts out so make sure that their furniture is valued at garage sale prices not replacement prices.

Rising markets can cause problems when it comes to calculating your pension.Credit: Simon Letch

They could reduce assets by pre-paying their funerals, renovating their home, or making a gift of $10,000. If they gave a bigger sum of money to the children now, their pension would not be reduced as it would be held as a deprived asset for five years but would not increase in value.

I am 67 retired, and drawing a pension from my $140,000 superannuation account with Host Plus, which is invested in their Indexed Balanced option. My husband, 61 is still in full-time employment, while I withdraw $2,200 per month from my super for additional needs. I will apply for the pension when my husband retires.

Host Plus offers a CPIplus investment option that guarantees a return of CPI (currently 2.8 per cent) plus 2.5 per cent, giving a total annual return of 5.3 per cent. However, the fees for this option are relatively high. Given the current volatility in global markets, especially in the US, I am questioning whether I should “kid glove” my pension account and move it into a safer investment option. Is this a prudent move to protect my balance, or would sticking with Indexed Balanced, despite the risks, be better in the long term?

It’s interesting that the previous question was about markets rising, and this one is about markets falling. You may well have more than 25 years of life ahead of you, and therefore you should be taking a long-term view of your investment choices.

Once you try to time the market, you are on a slippery slope because you will be trying to judge when is the best time to exit the market and then decide the best time to get back into the market.

History tells us that the best performance comes from hanging in there. Just make sure you have adequate cash on hand for the next three year’s expenses.

We are struggling to understand the work test requirement that supposedly prevented my wife – now aged 72 – from claiming the $330,000 she contributed to her superannuation as non-concessional contributions. In 2022, she received a windfall from the sale of land, incurring significant Capital Gains Tax (CGT). At the time, she was fully retired, and her total superannuation balance was well below the $1.9 million cap. We asked our financial adviser whether she could offset the CGT liability by deducting the three years of “catch-up” contributions. However, we were told that she would need to satisfy the work test to claim these contributions as concessional and receive the tax deduction. As a result, she paid the full CGT.

I think you may have misunderstood the adviser, or else the terminology.

There are two types of contributions, concessional and non-concessional. The first is tax-deductible, the second is not. You can contribute non-concessional contributions with no work test until age 75, but they are not tax-deductible and cannot reduce your CGT.

You are probably referring to concessional tax-deductible contributions and to use them after 67, you must pass the work test in the year you claim the contribution. To make catchup contributions on top of the standard concessional contribution cap, your super balance at the previous 30 June must be under $500,000.

I am 61 and planning to retire next year. My wife is 58 and has no immediate plans to retire. I have $420,000 in super, and she has $600,000. We also own $400,000 in shares, which are in my name. Our only debt is a $130,000 mortgage, offset by $100,000 in an offset account. Should we leave the money in the offset account to slowly pay down the mortgage, or would it be better to put some into super – either mine, my wife’s, or both?

Probably the notional rate you are getting on your offset account is less than the amount you are earning in your superannuation fund. My suggestion is to use the funds in the offset account to top up your tax-deductible superannuation contributions to a total of $30,000 a year including the employer contribution.

This will quickly boost your superannuation to a level where it would be at least as much as the mortgage when you’re due to retire. At that point, you could either let your super continue growing, withdrawing enough annually to cover the interest, or simply take out the whole balance tax-free to pay off the loan.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Questions to: [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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