The Australian’s Money Cafe podcast: Liam Shorte and James Kirby discuss if super is worth it

A dilemma faces investors who have built just enough wealth in super to exclude themselves from the pension. Here’s what to do if you are in this so called retirement ‘black spot’.

The black spot in super is that level where government benefits fall away but annual investment income may be little better than pension. Picture: Julian Andrews

Inside financial advice circles some call it the retirement ‘black spot’: The wealth level where government benefits fall away but annual investment income may be little better than a pension.

Put simply, the government pension is worth $24,000 per annum, or $36,000 for a couple, and that is before any other benefits such as the energy supplement are taken into account.

The dilemma facing superannuation savers is that access to the pension is gradually withdrawn as superannuation assets accumulate.

Financial planner, Liam Shorte of the Verante Group, tell this week’s Money Cafe podcast that some savers frustrated with very low returns have been trying to preserve access to the pension by spending as much as they can rather than investing for their future.

Industry analysts suggest the problem patch is where savers have assets between $400,000 and $800,000. Taking an extreme example: If a saver had $800,000 in assets concentrated in very conservative investments — such as low interest cash accounts — then someone on a full government pension may be better off in terms of weekly income.

On 2 per cent cash rates, an individual saver with $800,000 would earn $16,000 a year.

Yet with that level of assets the saver is likely to be entirely excluded from any government pension.

For homeowners, full pension access is no longer available once a person has more than $280,000, or $419,000 for a couple. Once past that asset level the access to the pension ‘tapers’ down.

Once the homeowner becomes too successful as an independent investor government pension access cuts out entirely – the cut-off point is currently $622,00 for a single and $935,000 for a couple.

“I’ve seen people put in a swimming pool they hardly use to make sure their assets still allow pension access,” says Shorte. Advisers suggest anyone who tries to reduce their assets to maintain access to the pension also offers up their financial independence with no assurances from government that pensions will remain unchanged.

And Shorte says there are much more progressive options for savers facing the loss of access to a pension. Among the choices are certain tax-protected annuities or home improvements that make old age more comfortable such as redesigning access to the home.

Shorte deals with the issue in the final listener’s question this week on The Australian’s Money Cafe.

In this week’s show also covers:

• Is this the high point for cash deposit rates

• How to hedge your bets on hedging

• Looking for income outside Australia

Questions for the podcast are always welcome at [e-mail]