Ways to maximise your age pension

The age pension can be a crucial part of the financial mix in retirement, but many retirees aren’t unlocking its full potential.

On this episode of the Friends With Money podcast, Money’s Tom Watson is joined by Andrew Dinsdale-Scanlon from TelstraSuper Financial Planning to run through the financial strategies that could help Australians maximise their age pension entitlements.

00:00 Introduction

00:41 Overview on maximising the age pension

01:48 Strategies to reduce assets

03:31 Spousal contributions

05:13 Understanding lifetime pensions

08:07 The impact of debt on the age pension

09:49 Conclusion

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*Proudly brought to you by Telstra Super 

Disclaimer:
Andrew Dinsdale-Scanlon is a financial adviser with Telstra Super Financial Planning Pty Ltd ABN 74 097 777 725 AFS Licence No. 218705. TelstraSuper Financial Planning provides financial advice service to members of TelstraSuper ABN 85 502 108 833. Telstra Super Pty Ltd ABN 86 007 422 522 is the trustee of TelstraSuper and wholly owns TelstraSuper Financial Planning. Advice that Andrew gives is of a general nature and does not take into account the particular circumstances or needs of any specific person and because of that, you should consider your own circumstances before acting on any advice . Additionally, the scenarios discussed are based on the relevant superannuation rates and thresholds for 2024/25 and may change in future years. If you are considering acquiring a financial product from TelstraSuper you should read the relevant product disclosure statement and target market determination before making a decision which are available at www.telstrasuper.com.au. The financial services guide for TelstraSuper Financial Planning is available at www.telstrasuper.com.au

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:01):
Welcome to the Friends with Money podcast, brought to you
by Money Magazine, creating financial freedom for Australians since nineteen
ninety nine.

Speaker 2 (00:12):
Hello and thanks for joining us for another episode our
Friends with Money, money Magazine's podcast to help you earn, save,
and achieve your financial goals. My name is Tom Watson,
a senior journalist here at Money Magazine, and as always
it is a pleasure to be with you. You've worked
hard all your life, you paint your taxes and now
retirement beckins. So when that day does come, it's large

(00:35):
called the people will want to be making the most
of any financial support they are entitled to. And in
Australia we are fortunate enough to have income support in
the form of the age pension. But how can eligible
retirees make the most of their pension? Well we will
get into that and more on today's episode are Friends
with Money and I'm very pleased to say that. Ready

(00:57):
to lend his expertise on the subject is today's guest
Andrew Dinsdale scandal in from Teals to super financial Planning. Andrew,
Welcome to Friends with Money. Thanks Tom, good to be here, boy,
You're very pleased to have you on board today, Andrew,
and listen right up top. What are the secrets to
getting the most out of the age pension?

Speaker 3 (01:16):
Okay, so I would suggest maximizing the age pension is
really a common concern for retireves. The amount you received
depends on Centre links, income test and asset test, where
Services Australia assesses your finances to determine your eligibility and
payment amount. So there are three key ways I see
to potentially increase your pension, which includes reducing assets, restructuring

(01:40):
ownership of assets, and making strategic financial moves.

Speaker 2 (01:44):
Well, let's break those down there, Joey. I think that's
the easiest way to go about it, and let's start
with the first one you mentioned that Andrew, which is
about reducing people's assets. So how can people go about
reducing their assets? Well, Tom, the most common way I
think is fifting money of items. You can gift up
to ten thousand dollars in one financial year or up

(02:05):
to thirty thousand dollars over five financial years. Also, if
you gift at least five years before claiming a pension,
they won't be included in your accessible assets. So obviously
a bit of forward planning can help there, And yeah,
I guess I'm sure that you know that's something that
people's kids or whoever the recipients of that money will

(02:25):
be wouldn't mine. But andrew, what if someone doesn't actually
want to give them money away?

Speaker 3 (02:31):
A simple, often overlook strategy is reviewing the declared value
of your assets. So over time, most assets depreciate, meaning
they may be worth less when you initially reported them.
For example, a newly purchased car may have been worth
fifty thousand dollars or could drop to say, thirty thousand
in a few years.

Speaker 2 (02:51):
Yes, sadly, I aah, I know that. Well, so what
sort of impact can actually have then?

Speaker 3 (02:56):
Well, Services Australia calculates your pension eligibility based on market
value or in other words, what price you would receive
at a garage cell rather than the ensured replacement cost.
I would therefore suggest checking whether your assets have actually
depreciated over time.

Speaker 2 (03:13):
It's a really good point and not something I'd necessarily
would have thought of, So in summary, people shouldn't just
set and forget. It's probably worth reviewing their values from
time to time, or you know, they could end up
getting less pension than their entitled too. But moving on, Andrew,
what else can people do in this respect?

Speaker 3 (03:31):
Okay, so, well, if you have a younger spouse, for example,
who isn't old enough to currently qualify for the age
of pension, transferring some of your retirement savings into their
super account could be beneficial. Now, this is because their
superinnoation balance doesn't actually count towards the government's asset test
until they reach the age of sixty seven years old,
which may help you qualify for more pension benefits.

Speaker 2 (03:54):
Again, I didn't realize that was possible, but it makes
complete sense. So how could I guess in theory someone
you know or how much could someone move?

Speaker 3 (04:03):
Well, each year, you're allowed to contribute one hundred and
twenty thousand dollars into your superannuation account if the balance
across all your superanuation accounts is less than a certain amount.
There's also a special rule that lets you bring forward
the next two years of contributions. Now that means that
you can make up to three hundred and sixty thousand
dollars in one contribution.

Speaker 2 (04:24):
I'm just doing the calculations of my head there and
during that's obviously a lot, and I can imagine that,
can you know, make a pretty big difference to the
assets test? Right?

Speaker 3 (04:34):
Oh, it certainly has its potential. Yes, However, it is
worth noting that once the younger spouse do turns sixty seven,
this advantage will be removed because at sixty seven years
of age, their super balance will then become accessible under
the age pension income an assets test, and this could
affect overall pension entitlements for yourself.

Speaker 2 (04:53):
Right, fair enough, Okay, that makes sense as well. So
basically you've got to enjoy it while it's you know,
while what if you're single though, or you know you
don't have a younger spouse.

Speaker 3 (05:05):
That's a good question. One of the strategies anybody can use,
and that's to move your money somewhere that's treated more
favorably by the asset test. Now, for example, a lifetime pension.

Speaker 2 (05:15):
All right, we're definitely going to need a bit of
an explained when it comes to lifetime pensions, then, Andrew,
what exactly is a lifetime pension and how can someone
I guess know if it's right for them?

Speaker 3 (05:26):
A lifetime pension is when you exchange a lump sum
of money to effectively buy a lifetime income stream. Now,
the details of each lifetime pension can vary, but for
the tel Stress super lifetime pension, the main aim is
to protect you from outliving your retirement saving.

Speaker 2 (05:44):
So very kind of short. In some someone might receive
x dollars per month or per year. Is that kind
of how it works in the scheme of thing that
is correct?

Speaker 3 (05:56):
Yes, yeah, so you can choose the frequency of payment.

Speaker 2 (06:00):
So why might an option like our lifetime pension be
a good option for I guess some people wanting more
age pension?

Speaker 3 (06:09):
I guess for people whose age pension eligibility is assessed
under the asset test, a lifetime pension could actually increase
your age pension because only a portion of the investment
is counted. Now. For example, if you had one hundred
thousand in a lifetime pension and the current rules is
counted as just sixty thousand dollars for the asset test. Now,
it also made be worth noting that recent research has

(06:32):
suggested that when retired, having a lifetime or guaranteed incomestry
can help one's lifestyle and retirement. Now that can provide
more peace of mind when compared to investing or retirement
savings in linked investments for example. Now, the reduction of
market linked risk can actually support one's overall well being
in retirement. Now, this has been suggested in a few

(06:54):
recent studies I've come across in the past.

Speaker 2 (06:57):
Oh really, that's so interesting. What's that? I guess logical
or thinking behind that?

Speaker 3 (07:01):
Then, I've completed recent academic research, so I've explored various
scholarly journals focusing on mental health and well being in retirement.
And now a key aspect of my project was to
examine the financial security of retirees. Now, through surveys, I
identified a positive correlation between individuals who had chosen a
lifetime pension income stream and the confidence in their future

(07:24):
retirement lifestyle. So, when looking deeper into that data, I
found that having an index income for life provided respondents
with greater financial certainty and particular in relation to their
everyday spending habits. Now, this insight suggested the importance of
financial planning in ensuring both economic stability and overall well

(07:45):
being in retirement.

Speaker 2 (07:47):
That is so interesting. It does make a lot of
sense to me as well. Just having that kind of
confidence and a surety of what you're going to be
able to have from our financial perspective and perhaps something
people entering retirement through gives serious thought too. Andrew. One
thing we haven't talked about yet today, though, is debt.

(08:07):
Can that have any impact on someone's pension?

Speaker 3 (08:11):
Absolutely, most debts aren't offset against assets for means testing,
so if you have any debt, it may be worth
paying it off to reduce your money in the bank,
therefore boosting your pension. But also some people like to
consider purchasing funeral bonds to prepay funeral costs in advance.
Now they are the few rules to this, but they

(08:32):
can also be exempt from the asset test if you
meet those conditions.

Speaker 2 (08:36):
Again, it's so interesting. I guess it underlines one of
the strands running throughout this conversation today that there's obviously
a fair few things for people to think about and
options to consider surrounding this. And speaking which Andrew, are
there any dangers that people should be aware of while
trying to increase their pension.

Speaker 3 (08:57):
It's vital to make sure that any arrangements you make
still suit your cash flow objectives. For example, there's no
point paying down debt to get more pension if you
can't afford you weekly bills. Now, please remember that everyone's
circumstances are different, so what works for one person may
not suit another. Therefore, I believe it's so important to

(09:18):
consider professional advice.

Speaker 2 (09:20):
It's an excellent point, I think, and probably a very
good place to bring our conversation to a close today.
Then I feel like we covered heber ground. So hopefully
everyone listening has a much better grasp of some of
the ways that they can go about maximizing their age
pension if they're in a position to do that. That is,
it's a few decades off for me, but I definitely

(09:41):
feel more informed, that's for sure. So Andrew, thank you
so much for joining us. It's been a real pleasure
having you on.

Speaker 3 (09:47):
Thanks Tom, thanks for inviting me.

Speaker 2 (09:49):
That's it for this episode of the Friends of Money podcast.
But don't forget to jump on our website moneymag dot
com dot au for your daily dose of financial news.
We can go grab yourself any copy of the Lady's
Position of Money magazine in all good newsagents. As always,
Friends of Money will be all right back in your
podcast feeds next week. So until then, my name is
Tom Watson. Goodbye for now.

Speaker 1 (10:10):
Thanks for listening to the Friends with Money podcast for credible,
independent and easy to understand financial commentary visit moneymag dot
com au. Please remember that the views and opinions expressed
in this podcast are general in nature and further independent
advice and research based on your personal circumstances should be

(10:31):
sought before making an investment decision