Superannuation tricks to increase your age pension payments

Australians received an age pension rise last month, but bigger gains can potentially come from a few superannuation strategies.

A majority of retiring Australians live off a combination of their superannuation and pension income, and this won’t change for decades.

The age pension – currently paying a single retiree $952.70 a fortnight and a couple $1436.20 – is more than just a safety net, and delivers valuable money to help make golden years sparkle.

Long-term forecasters expect at least half of Australian retirees will be receiving some level of age pension for the next 50 years, although super will increasingly deliver a bigger share of their income.

Today’s asset test rules allow a single retiree homeowner to have super and other assets of up $585,700 and still receive some pension, and they will get a full pension if their assets are below $268,000 (or $401,500 for couples combined).

Some super tricks can maximise your pension income, and here are some strategies to consider.

Seniors can use super to potentially increase their age pension income. Picture: Getty Images

TIMING IS EVERYTHING

A great way to get a full pension in the early years of retirement is to use a younger spouse to effectively make your super disappear.

Superannuation assets do not count towards the assets test until you reach pension age – currently 66 and rising to 67 in 2023 – so a pensioner’s super can be withdrawn then moved to their younger spouse’s fund. There it can hide until the younger spouse hits pension age themselves.

Don’t think about trading in your current spouse for a younger one just for financial benefits, but if you can work the pension system well, it can pay off in higher payments.

THINK BEFORE DOWNSIZING

A superannuation incentive introduced a few years ago allows people over age 65 to voluntary contribute $300,000 into their super from the proceeds of selling a home. That’s $600,000 per couple.

However, remaining in a more expensive home may help some seniors maximise their age pension income.

That’s because peoples’ homes are exempt from age pension means testing, even when they’re worth $1 million-plus.

A pensioner homeowner has lower asset test thresholds than non-homeowners, but the difference is only a couple of hundred thousand bucks. And you won’t get a lot of real estate these days for $200,000.

For some, a reverse mortgage or the Federal Government’s Pension Loan Scheme may be an alternative.

UNDERSTAND TAX BENEFITS

The age pension is treated as taxable income – just like other income from shares, property rents and interest from cash in the bank – but a personal account-based pension started from superannuation savings is tax free.

You pay no tax on capital gains, no tax on income, and there’s tax-free withdrawals from super if you need the cash.

While your super will still count towards pension calculations, the financial benefit of paying no tax on super earnings should not underestimated.

GET HELP

Professional financial planners can deliver powerful money-saving advice around superannuation, pension and tax strategies for retirees.

While planners came under fire from the recent royal commission over sales tactics and commissions, for pure advice they’re often pay-as-you-go, and after an initial meeting should be able to give you an idea of the financial benefits their strategies can deliver.