August 7, 2025 • 27 mins
Inside the advice sector, they call it ‘the sweet spot’: The perfect amount of money to have in super that also guarantees you access to a government pension. With the majority of Australians accessing full or part-time pensions, it’s a big game and the rules have been clear for a long time.
But those ‘pension access’ rules may soon be overhauled as the government launches a major tax review this month at the so-called ‘productivity summit.
Hugh Robertson of Centaur Financial Services joins Associate Editor - Wealth James Kirby in this episode.
In today's show, we cover...
- The retirement sweet spot for optimising pension access
- The retirement black spot - just missing out on a pension
- Why the pension asset test may soon be tightened
- Dividend Reinvestment Plans - Not for everyone
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello, and welcome to The Australian's Money Positive podcast. I'm
James Kirkby. Welcome aboard everybody. We hear so often in
investment circus this question how much should you have in super?
But you know another question that's almost as relevant. It's
certainly relevant for the majority of Australians because you probably
know the majority of Australians have access to a full
(00:33):
or part pension. So a better question sometimes is what
is the optimal amount I should have in super so
that I can access the government pension because thirty thousand
a year income stream is nothing to sniff at government guaranteed. Now,
inside financial advice, this is called the retirement sweet spot,
(00:55):
and whether you intend to access this or not, you
should know what it is so that you can optimize
your own SUPER accordingly. My guest today is Hugh Robertson.
He's a Baron's Top hundred financial advisor. He's at Center
of Financial Services and he has been a regular on
(01:16):
the show.
Speaker 2 (01:16):
How are you, Hugh, I'm really good, James, So I'm
excited about today's topic.
Speaker 3 (01:21):
It's right now sweet spot, so it's a good day.
Speaker 1 (01:24):
Well, I'm glad it is because I thought I knew
an awful lot about this area. I'm still amazed at
the majority of people, that is, the majority of people
over in their sixties and onwards who are of that
age have access to a pension or a part pension.
So this sweet spot is where there's an argument to
(01:48):
say instead of certainly an argument to say, unless you
have plenty in super and you don't care about the pension,
then most people and a lot of listeners on this show,
we'll want to know what is the amount I should
aim for. At the same time, I can get that
government pension because I'm entitled to it because I've worked
all my life, and that's fair enough. So let's talk
(02:10):
about that. Maybe we'll just make it simple for everybody.
We'll talk about couples, okay, because that's a sort of
very much a key sort of unit in this area. Now, what,
very broadly, what is the if I'm thinking and I'm
in a couple, I'm thinking, we're doing this, we're saving,
we're trying to build up our super. But I don't
(02:31):
want to be at that point where I've got a
good bit of super, but I completely missed the pension.
But I don't have so much in super that I
can have a yacht on Sydney Harbor. So what's the
what is the sweet spot?
Speaker 2 (02:44):
What?
Speaker 1 (02:44):
Very roughly you and I know it's not easy, but
let's just have a go at it. What is what's
the dollar range here that we're talking about.
Speaker 2 (02:52):
This is a great question and something I'd love all
the listeners to really understand because it's the number we
would say is between that sort of six to eight
hundred thousand, and it's the strategies that come with that
before the age of sixty seven when we're all eligible
for age pension, that we've really got to enable in
terms of what we can do with concessional contributions, catch
(03:15):
up contributions, quite possibly bring forward contributions. So it really
goes head in hand with what we can do with superannuation,
what we can do with gifting. So that would be
our sweet spot. For a homeowner couple, we've got to
probably make that distinction as well, that we're assuming that
they're homeowners. Then you are looking at that six to
(03:37):
eight hundred thousand.
Speaker 1 (03:38):
Okay, okay, So first of all, folks, you've heard you've
heard it here. For us, the sweet spot is six
hundred sweet hundred thousand. That's our current numbers. Okay, all
sorts of provisers around that, but that's broady arranged for
the sweet spot. Now if that's a sweet spot here.
The other question I want to try and get sort
of on the table simply for this show, is there's
(03:58):
probably a patch then where, like everything else, when you
have social welfare or you have government incentives of any description,
including the age pension, there's probably a band that you
don't really want to begin where you just missed the pension,
but you don't have you don't have blue Sky, right,
you don't have so much in super that you don't
care what the pension is. What would that band be?
(04:21):
What would be the danger zone there or the trouble zone?
Speaker 2 (04:25):
The danger of the trouble zone is really around that
nine to seventy five thousand up until the up until
about a million fifty The age pension for a couple
runs out at one million fifty nine thousand currently, So
if you're getting up around that limit, that's a worrying
(04:45):
time because you don't for the majority of listeners out
there we've ever had to go through an age pension
application process, you wouldn't want to have to rego through
that because that would bring up PTSD.
Speaker 3 (04:56):
For a lot of people. That's quite yes, quite a process.
Speaker 1 (05:00):
When you get a full pension, it's an income stream, right,
I mean, how much do you think you'd a person
to get that amount a couple annually that they getting
the pension that income stream? How much do you reckon broadly?
Somebody would have to have invested to get that.
Speaker 2 (05:19):
Yeah, so when we look at for that, you're a
couple would get forty five thousand if they qualified for.
Speaker 3 (05:26):
A full age pension. Even if you've got.
Speaker 2 (05:30):
Just do easy maps and say well, if I got
four and a half percent on my money in a
term deposit, that's forty five a year, I've got to
have a million dollars.
Speaker 3 (05:39):
So for a full age pensioner to get their.
Speaker 2 (05:42):
Forty five thousand, it's the same as someone having a
million dollars. So that that's where you say, people say, well,
why am I working so so bloody hard to put
all my money away if I could get the same amount?
And that we could touch on that later because there's
every chance that the rules changed significantly over the next decade.
Speaker 1 (06:00):
They're not going to they're not going to get more generous. Okay,
but that's the point. That's such a good point. You
know that you needed to have that money to get
that income, you'd want to have about a million saved.
Put simply, it's worth a million dollars. So it's worth
thinking about and listeners. You can make your own mind
(06:20):
up whether you want to play this game or don't
play this game, or you aspire to say I don't
care what the pension is because I'm going to pass
those levels. But as I say, look at the numbers,
the majority of Australians have access to full pensions. So
it's extraordinary how it works. So, just in terms of
before we go into what might happen to it, you
(06:41):
that are people aware of it outside of financial advice circles,
That do people design their super strategies around it?
Speaker 2 (06:54):
No, at this stage no, I feel there's been so
much regulatory change and legislative change with the superhneration system,
with the age pension system that people haven't really factored
that into the strategy. You've extended the age to sixty
seven for both males and females to access it now,
(07:16):
so really you've got to start thinking about it at
age sixty two around.
Speaker 3 (07:20):
You know, because you could.
Speaker 2 (07:20):
Utilize quite possibly you could utilize gifting strategies to your kids.
Why would you want to do that? Well, number one,
it might help them into the housing market right now.
Number two, it might be able to maximize your age
pension entitlements. But if you did it within five years,
it's going to count towards your assets and might impact
your eligibility for a pension.
Speaker 1 (07:41):
Well, they tracked back five.
Speaker 2 (07:43):
Years, five years, So you've got to be very intentional
with what you do. And that's probably our challenge to
clients is all our financial plans need to have that
element of intentionality with them.
Speaker 3 (07:55):
Let's not become successful by accident. Let's do it on purpose.
Speaker 1 (07:58):
So you can't turn around as sixty for and say
I know what I'll do, I'll double the size of
my home and get back in onto the pensions too late,
is it.
Speaker 3 (08:06):
Well, no, we could do that.
Speaker 2 (08:07):
We could definitely do that, because the home is going
to be an exempt asset under undercurrent rules that may change.
Have got to be careful and definitely that's a strategy
that some people have thought is I'll just put more
money into a house. The challenge there now is the inflation,
the inflated price of renovations or new houses. Plush your
stamp duty plus your agent fees selling means that you've
(08:31):
probably to do that.
Speaker 3 (08:32):
You've probably given up a couple one hundred thousand dollars.
Speaker 2 (08:35):
And the reason why you want to still maintain that
you do have a balance throughout your tirement is also
for age care down the road.
Speaker 3 (08:44):
So you don't want to you don't want to leave
yourself with nothing.
Speaker 2 (08:46):
You kind of want to be able to live off
the income, maximize the age pension where you can, but
still have enough that if one spouse needs to go
into age care, you can. The dilemma baby boomers are
going to have around that is that there's probably more.
I went through it with my mum recently and there's more.
There's more people wanting beds that there are beds available.
Speaker 1 (09:07):
I know, yes, almost entirely separate. Sure we could do
on that and I should seem to do it in
the future. Just on just still on this issue about
you said gifting so one way obviously, and none of
these are productive and you can understand why they are.
Under a few folks, and we'll talk about that in
the next segment, tell us about the gifting. What can
(09:28):
you do to get back into the sweet spot?
Speaker 3 (09:33):
Yep, to the sweet spot. Really great question.
Speaker 2 (09:36):
So ideally we can give five years before our entitlement,
you know, but again do it.
Speaker 3 (09:42):
Don't play defense just for defense sake, you give gifts
to it.
Speaker 2 (09:47):
If you had a younger spouse, you could try and
maximize their superannuation instead of yours. Then when you are
of age pension age, your superannuation will be accessible, but
there's wouldn't be.
Speaker 3 (09:59):
So you can be really clever around that.
Speaker 2 (10:02):
You could also something that's probably a little bit future planning,
but when you are looking at what to do is
how you're going to leave your estate, not necessarily to
your spouse, because then as a single age pensioner, if
you left all your money to them, they might then
lose out on the age pension. And you could do
(10:24):
the renovations around the house. You could spend the money
on the holidays and the things that you want. And
that's probably our ideal goal with clients is well they've
got the health, fit and the ability and the want.
Speaker 3 (10:34):
To travel and do all those experiences, do.
Speaker 2 (10:37):
Them while you can, and knowing that if I'll give
a quick case day, like if you had eight hundred
thousand in retirement, and say that's a couple homeowners and
they're accessible. Typically as an advice, we'd say draw down
about five percent of the balance a year, so that
would be forty thousand a year from there. We're assuming
that it's a superannuation income stream from there, and their
(11:00):
age pensioning titlement would be about twenty thousand, one eight
nine a year, So that total would give that person
with a couple with eight hundred thousand, they would get
sixty thousand.
Speaker 3 (11:09):
One eight nine a year. If though that person spent.
Speaker 2 (11:13):
One hundred thousand on the holidays and these great experiences
and memories for life, we would then still say, okay,
now you've only got seven hundred thousand, so draw five
percent of that a year. So they're taking thirty five
thousand out of there. But here's the kicker, Jameson and
something that always amazes me, they would now get close
to twenty eight thousand year age pension in titlement as
a couple. So instead of the sixty one to eight nine,
(11:36):
the one hundred and nine that the couple got with
eight hundred k, the couple with seven hundred k actually
gets close to sixty three thousand dollars a year, so
they get more cash flow even though they've got less capital.
So this is why we're talking about wesson speak throt.
Speaker 1 (11:51):
Maybe it just really spelled us out. They spent one
hundred thousand having a good time and they get more
income because they did that. Hey, we're going to take
a break here because folks, you're going to have to
digest that. And it also does give us something of
a entree to the issue of whether this is all
making sense and whether it should be reviewed. Okay, back
(12:13):
in a moment. Hello, Welcome back to The Australian's Money
Puzzle podcast. I'm James Kirby talking to Hugh Robertson of
(12:34):
Centaur Financial Services and we're talking about the retirement sweet spot.
Speaker 3 (12:38):
Now, if you.
Speaker 1 (12:39):
Could actually believe what Hugh was just telling you in
the first segment about how there are situations where having
less money is better in terms of your retirement income,
that's part one. That's all about the pension assets test.
Now overriding all this, we have this month what they
call the productivity somewhat but which really should have been
(13:01):
called the tax summat and that's coming up pretty soon.
That's Jim Chalmer's big It may be more than just
talkfest in camera, but if you look at it closely,
the submissions that are being met to this are all
about tax, and I would take a sweep and say
virtually half those submissions are about wealth tax and introducing
(13:24):
elements of wealth tax, which can certainly be justified on
the basis that the system is very much tilted in
favor of older Australians and against younger Australians in accumulation phase,
particularly in Super Okay, Now here's the thing. The pension assets,
even the numbers you were putting out there, Hugh, there
are an I can actually zone in on the Department
(13:47):
of Social Services Tania Plippersex Department has had internal advice
that this area should be reviewed and pension asset tests
are likely to be reviewed as part of this summat
could be reduced. Is that a fair assessment of the situation.
Speaker 2 (14:06):
Yes, we've got an aging population, We've got this dependency
ratio used to be four workers to.
Speaker 3 (14:12):
Every one retiree.
Speaker 2 (14:13):
Now we're get into this operation two two and a
half workers two workers. So at some point it's how
are we going to fund an age pension system. We've
probably been the lucky country from resources in terms of
our taxes there, but at some point the wealth tax
is going to come in. I think we all can
(14:34):
see it in one way or another, and I think
that you're also going to it. At some point age
pension will drop down.
Speaker 1 (14:42):
Do you mean you mean the access to the not
so much eat because it's indexed to inflection, but the
access to it will be tightened. Is that where we're
Is that what's on the line.
Speaker 2 (14:54):
I feel it needs to be, because otherwise you're going
to I don't know how you keep taxing young people
when we that affordability is such an issue, has in
such an issue. So we're in a pretty it's a
pretty big pickle at the minute to try and resolve.
So I hope that the people in Cambri can work
hard to solve them.
Speaker 1 (15:12):
I mean, it is it's ludicrous. I mean, the amount
that you can put into super hasn't changed for years,
but the amount you can have tax three and super
goes up all the time. It's two million now, But
the amounts you can put in at the other end,
Paranamus thirty thousand, don't changed. It was thirty thousand ten
years ago. That's the sort of thing that I think
justifiably should be reviewed. It's going to be reviewed, folks.
(15:34):
I think there's two things to understand. I suppose this show.
One is a retirement sweet spot. You heard Hugh's numbers.
Just be aware that those numbers may drop if various
lobbyists and factions that are ready to roll up to
this summit have their way, which is coming up this
month of August. One other thing you mentioned about the
tax about the family home being exempt. So all these
(15:56):
numbers we talk about, we assume the personnels their home
and the home is just not included. Is that right?
Do you think it will ever be included? The value
of the home.
Speaker 3 (16:06):
It's been discussed, it's certainly being discussed.
Speaker 2 (16:09):
And whether it's really difficult, like the price of a
house in Sydney. Does someone get disadvantaged because they live
in Sydney close to their family, part of their community
forever versus someone who lives in Tasmania where the house
is cheaper. Would you then segregate it based off what
state you live in, what region you live in?
Speaker 3 (16:27):
So I the.
Speaker 2 (16:31):
Kind of almost like the div two ninety six and
the issues that we had with that.
Speaker 3 (16:34):
It's how do you actually administer rule rules like that?
Speaker 2 (16:39):
And is it The example that we used to use
was if someone's lived in that house, if there's a
typically women live longer than men's. If there's an old
widow that lives in the house that the family grew
up in and they've been there for forty five years,
but now it's worth five million.
Speaker 3 (16:54):
She's not she should she? So that should she be
penalized for that?
Speaker 1 (16:58):
If she had no cow should be on the pension?
So should her a pension be reduced because the houses
were ten million that she bought it for five nineteen
sixty two?
Speaker 2 (17:07):
Yeah, so you know, that's the equity conversation. He's in
terms of a financial equity, but what's a fairness? So
I can't see it ever, especially with the majority of
voters being of more grayer hair, I can't see a
government bringing that in right, that would be that politically
divisive for them.
Speaker 1 (17:26):
Okay, that's the inclusion of the family home. But interestingly,
you do allow for the fact that they could review
the pension as a test. Yeah, okay, very interesting. We've
got some really good questions. I want to get to
them in a moment before I do. He was a
little announcement to make for somebody.
Speaker 3 (17:44):
I thank you.
Speaker 2 (17:45):
I would like to wish my son, Archer, a happy
eleventh birthday.
Speaker 3 (17:50):
It's an amazing thing. We get to help all these retirees.
Speaker 2 (17:52):
And the one thing they always tell me is never
miss out on your kids growing up, because that's the
one thing you can't get back. So I did ask
James if I could give a shout out to him,
and hopefully he listens to this podcast.
Speaker 1 (18:05):
Well, at least he'll hear. He'll probably hear that he
was mentioned Donald. Well, my story straight off the top
of that about birthdays terribly. I make sure I never
missed a birthday. But I did miss one birthday and
it was my daughter, and it was October two o eight,
and it was the day the world came very close
to collapsing. The nearest thing in my life it leads
(18:26):
to a complete and total financial collapse. Was this Saturday
in October, which was her birthday, and I was being
asked to do so many things. It was a Saturday,
I was on Sunday newspapers and I was on radio
and I missed this birthday party. Two. Wait, so what
(18:46):
was she nine? Well, let me tell you, boy, did
I get it in the neck about that? So I
explained to her, And in recent times she whenever I
bring it up, and I bring it up more than
she does now I say to her, So you see,
it was the most dangerous day financially in the history
in my life. And I'm a financial journalist. So Darling,
sorry about that, but I hope I can never make
(19:06):
it up, but I can explain it.
Speaker 3 (19:07):
All right.
Speaker 1 (19:08):
We'll be back in a moment with some great questions
from George and Bruce and Paul f. Hello. Welcome back
to The Australian's Money Puzzle podcast. James Kirby and Hugh
Robertson here now listener questions. This week, there's a terribly
(19:32):
act question from George. I want to read that first,
Dear James, your article in this week's Australian that the
super inheritance tax can be avoided by withdrawing all your
super money before you die or by a recontribution strategy.
I think there is a third way around this, if
you make a binding nomination in your super fund that
(19:54):
upon your death, your benefit is paid to your estate,
then it is my understanding no taxes payable then. And further,
when the result in super cash is received by the
estate is paid out to the beneficiaries in your will,
no tax is payable then either. Gee, I don't know
about that, but I happen to have a few robertson
in the studio, and he's going to tell us if
(20:15):
that's true, true or false?
Speaker 3 (20:18):
George that he's false.
Speaker 1 (20:21):
I thought I've got a binding nomination on my super
I never thought it could step aside the rules.
Speaker 3 (20:28):
Okay, I liked the question and I like looking at it.
But in terms of what can we do.
Speaker 2 (20:33):
We can withdraw this tell us the day you're going
to die, so we can withdraw it the day before
the recontribution the because ultimately it goes to the end user,
so even it goes through the estate, it will go
through to that. If he is your spouse or dependent,
a tax dependent, then there won't be that's a spouse
child under eighteen dependent in tendency if it's an adult child.
Speaker 1 (20:57):
But in most cases it's adults dependent and they are The.
Speaker 2 (21:01):
One I did we have seen is an insurance equalization strategy.
So sometimes if people know that they're going to have
to pay the tax for whatever reason, or they want
to equalize the estate, sometimes they will have they will
retain their insurance policies and pay that outside of SUPER
and pay that to their children. So again that's not
(21:22):
there's not a tax on that. But again the insurance,
the insurance premiums as you get older prohibitive.
Speaker 1 (21:29):
We'd go through the roof, I thought. So, okay, very interesting, George.
That's not advice. Information only all the Georges in the world.
That's for you to ponder. But I'm afraid if you
thought you found a way around the seventeen percent de
facto inheritance tax on SUPER, that isn't one. It looks
like Okay, there's a question from Bruce.
Speaker 3 (21:49):
Okay, so Bruce has asked.
Speaker 2 (21:52):
A recent guest was not impressed with dividend r reinvestment plans. However,
I suspect the issue is far more complex. Would it
be possible would have a discussion on the pros and
cons of such plans, what can be used instead, and
if any research is being carried out as to how
things are in the real world.
Speaker 1 (22:10):
Okay, thank you, Bruce. Look, dividend reinvestment plans. I think
they're a bit like mortgage mortgages, or by that, I
mean they are a discipline. And if I get my
dividends in cash and it flows into my account, I've
got to make a decision every time, on every dividend,
what am I supposed to do with that money? If
(22:31):
the comp I love the old thought that I don't
know where this came from, but there was that thing
that if something is good enough to have in your portfolio,
it's good enough to reinvest. I's a fact or dividend
reinvestment plans are fine or do you think you.
Speaker 3 (22:46):
Pros?
Speaker 2 (22:46):
Definitely the compound and if you look at even just
the ASX over time, just the price return versus the
price and dividend return, you know that compound and effect
is massive.
Speaker 3 (22:58):
There's a cost of fishing. See you're usually not paying
brokerage when you're invent.
Speaker 1 (23:03):
Less important than it used to be, Yes, but still relevant.
Speaker 2 (23:06):
Yeah, behavioral, you don't have to think about it. But
I do know that a lot of people like to
not do the DRP that even an reinvestment plan. So
because there is the timing of when you actually purchase,
do you want to purchase. Is it an ideal time
to purchase just because the DRP has happened. Sometimes it's
(23:28):
better to keep the money in cash and wait. It
is if you talk twenty accounts out there, and I'm
sure you've got a lot of listeners for accounts, that's
probably the bane of their existence. DRPs and accounting for them.
For our retirees, cash flow can be an impact.
Speaker 1 (23:44):
Of course, yeah, but in accumulation. Look, the other thing
I would say is I have never sold. I have
never closed down a dividend reinvestment plan, but I have
occasionally it has triggered me to sell the share. So
but that comes back to the same thing. If it's
good enough to sign up for a d ORP, then
(24:06):
it's good enough to have. And if it's not good
enough to have a d ORP, a dividend reinvestment plan going,
why are you in that stock in the first place?
That I mean, I think that would be the larger
guide I would just I would put forward.
Speaker 2 (24:18):
That's how we've basically alway, well not basically, that is
how we've done it.
Speaker 3 (24:24):
The only times we've then revalued is if there's concentration risk.
Speaker 2 (24:28):
So probably with bank stocks, we've got some GFC examples
from clients, and that way, we've just accumulated so much
wealth there we don't want to sell. Quite possibly because
of the cgt SO capital gain SAX, SORR, I've got
to stop using acronyms and then so we've tried to
reallocate that money elsewhere.
Speaker 3 (24:45):
But that's really the time, the only time when we
don't do DRPs.
Speaker 1 (24:50):
Okay, we had all day long, nothing else to do,
then you could stay right on top of it.
Speaker 2 (24:56):
There was an ASEX shareholder study and this conclusion was
that investors using DRPs don't track their performance or rebalance portfolios,
which was interesting, and professional portfolio rebalancing with dividend cash
is more flexible and aligned with goals. So I don't
think that really answered much, but it long term DRPs
(25:21):
can outperform obviously when the companies do well, which over
time they always do, so we're a fan of it.
It's simple, it's easy, it doesn't take much mental brain
power to do.
Speaker 1 (25:32):
So that's right, and as I said, it is a discipline.
Hopefully that's useful to you. Bluse Hughes. I thought a
very strong point from view that you're probably not playing
at the idea time. But then on the other hand,
it's recurring.
Speaker 3 (25:43):
Dollar cost averaging, dollar caast averaging.
Speaker 1 (25:45):
It's a bit of it's a dollar cast averaging kicks
in there as a thematic. The final question is from
Paul f. He says, taxi on realize gains has always
been a thing, though in directly so, why is dividend
or division two ninety six been the new super tax
so controversial? Well, it was never There was never unrealized
(26:11):
gains tax in your super before Paul left, So I
suppose that's what it's really all about. Okay, you can
bring out the issue of land tax or whatever in property,
but it was never a case in Super. And the
big question is if it's in Super, where it does
it go next. We'll have to leave it there. Let's
have some questions on that, Let's have some comments on that,
and I hope you found the retirement sweet spot well
(26:35):
worth thinking about understanding. And keep in mind that that
act that first of all, the majority of Australians, the
majority of retirement age, have either an age full age
pension or part pension. The issue is the access. The
access by some criteria has been relatively generous and it's
(26:56):
something that is now going to be I think seriously
reviewed in the weeks ahead, this Productivity slash Wealth Tax summit,
which is coming up in a few weeks. Hugh Robertson,
thank you very much for being on the show. Great
to have you as always.
Speaker 3 (27:08):
Thank you very much, James. I really enjoyed today.
Speaker 1 (27:12):
Really good.
Speaker 2 (27:12):
All right.
Speaker 1 (27:13):
The email is the Money Puzzle at the Australian dot
com dot au And also before you go, one other
thing coming up in the next few weeks where we
have a short series where we get some luminaries in
the financial space to talk about how they made their money.
That will be presented by Julianne Sprague and it starts
(27:34):
Monday Talk soon
Hello, and welcome to The Australian's Money Positive podcast. I'm
James Kirkby. Welcome aboard everybody. We hear so often in
investment circus this question how much should you have in super?
But you know another question that's almost as relevant. It's
certainly relevant for the majority of Australians because you probably
know the majority of Australians have access to a full
(00:33):
or part pension. So a better question sometimes is what
is the optimal amount I should have in super so
that I can access the government pension because thirty thousand
a year income stream is nothing to sniff at government guaranteed. Now,
inside financial advice, this is called the retirement sweet spot,
(00:55):
and whether you intend to access this or not, you
should know what it is so that you can optimize
your own SUPER accordingly. My guest today is Hugh Robertson.
He's a Baron's Top hundred financial advisor. He's at Center
of Financial Services and he has been a regular on
(01:16):
the show.
Speaker 2 (01:16):
How are you, Hugh, I'm really good, James, So I'm
excited about today's topic.
Speaker 3 (01:21):
It's right now sweet spot, so it's a good day.
Speaker 1 (01:24):
Well, I'm glad it is because I thought I knew
an awful lot about this area. I'm still amazed at
the majority of people, that is, the majority of people
over in their sixties and onwards who are of that
age have access to a pension or a part pension.
So this sweet spot is where there's an argument to
(01:48):
say instead of certainly an argument to say, unless you
have plenty in super and you don't care about the pension,
then most people and a lot of listeners on this show,
we'll want to know what is the amount I should
aim for. At the same time, I can get that
government pension because I'm entitled to it because I've worked
all my life, and that's fair enough. So let's talk
(02:10):
about that. Maybe we'll just make it simple for everybody.
We'll talk about couples, okay, because that's a sort of
very much a key sort of unit in this area. Now, what,
very broadly, what is the if I'm thinking and I'm
in a couple, I'm thinking, we're doing this, we're saving,
we're trying to build up our super. But I don't
(02:31):
want to be at that point where I've got a
good bit of super, but I completely missed the pension.
But I don't have so much in super that I
can have a yacht on Sydney Harbor. So what's the
what is the sweet spot?
Speaker 2 (02:44):
What?
Speaker 1 (02:44):
Very roughly you and I know it's not easy, but
let's just have a go at it. What is what's
the dollar range here that we're talking about.
Speaker 2 (02:52):
This is a great question and something I'd love all
the listeners to really understand because it's the number we
would say is between that sort of six to eight
hundred thousand, and it's the strategies that come with that
before the age of sixty seven when we're all eligible
for age pension, that we've really got to enable in
terms of what we can do with concessional contributions, catch
(03:15):
up contributions, quite possibly bring forward contributions. So it really
goes head in hand with what we can do with superannuation,
what we can do with gifting. So that would be
our sweet spot. For a homeowner couple, we've got to
probably make that distinction as well, that we're assuming that
they're homeowners. Then you are looking at that six to
(03:37):
eight hundred thousand.
Speaker 1 (03:38):
Okay, okay, So first of all, folks, you've heard you've
heard it here. For us, the sweet spot is six
hundred sweet hundred thousand. That's our current numbers. Okay, all
sorts of provisers around that, but that's broady arranged for
the sweet spot. Now if that's a sweet spot here.
The other question I want to try and get sort
of on the table simply for this show, is there's
(03:58):
probably a patch then where, like everything else, when you
have social welfare or you have government incentives of any description,
including the age pension, there's probably a band that you
don't really want to begin where you just missed the pension,
but you don't have you don't have blue Sky, right,
you don't have so much in super that you don't
care what the pension is. What would that band be?
(04:21):
What would be the danger zone there or the trouble zone?
Speaker 2 (04:25):
The danger of the trouble zone is really around that
nine to seventy five thousand up until the up until
about a million fifty The age pension for a couple
runs out at one million fifty nine thousand currently, So
if you're getting up around that limit, that's a worrying
(04:45):
time because you don't for the majority of listeners out
there we've ever had to go through an age pension
application process, you wouldn't want to have to rego through
that because that would bring up PTSD.
Speaker 3 (04:56):
For a lot of people. That's quite yes, quite a process.
Speaker 1 (05:00):
When you get a full pension, it's an income stream, right,
I mean, how much do you think you'd a person
to get that amount a couple annually that they getting
the pension that income stream? How much do you reckon broadly?
Somebody would have to have invested to get that.
Speaker 2 (05:19):
Yeah, so when we look at for that, you're a
couple would get forty five thousand if they qualified for.
Speaker 3 (05:26):
A full age pension. Even if you've got.
Speaker 2 (05:30):
Just do easy maps and say well, if I got
four and a half percent on my money in a
term deposit, that's forty five a year, I've got to
have a million dollars.
Speaker 3 (05:39):
So for a full age pensioner to get their.
Speaker 2 (05:42):
Forty five thousand, it's the same as someone having a
million dollars. So that that's where you say, people say, well,
why am I working so so bloody hard to put
all my money away if I could get the same amount?
And that we could touch on that later because there's
every chance that the rules changed significantly over the next decade.
Speaker 1 (06:00):
They're not going to they're not going to get more generous. Okay,
but that's the point. That's such a good point. You
know that you needed to have that money to get
that income, you'd want to have about a million saved.
Put simply, it's worth a million dollars. So it's worth
thinking about and listeners. You can make your own mind
(06:20):
up whether you want to play this game or don't
play this game, or you aspire to say I don't
care what the pension is because I'm going to pass
those levels. But as I say, look at the numbers,
the majority of Australians have access to full pensions. So
it's extraordinary how it works. So, just in terms of
before we go into what might happen to it, you
(06:41):
that are people aware of it outside of financial advice circles,
That do people design their super strategies around it?
Speaker 2 (06:54):
No, at this stage no, I feel there's been so
much regulatory change and legislative change with the superhneration system,
with the age pension system that people haven't really factored
that into the strategy. You've extended the age to sixty
seven for both males and females to access it now,
(07:16):
so really you've got to start thinking about it at
age sixty two around.
Speaker 3 (07:20):
You know, because you could.
Speaker 2 (07:20):
Utilize quite possibly you could utilize gifting strategies to your kids.
Why would you want to do that? Well, number one,
it might help them into the housing market right now.
Number two, it might be able to maximize your age
pension entitlements. But if you did it within five years,
it's going to count towards your assets and might impact
your eligibility for a pension.
Speaker 1 (07:41):
Well, they tracked back five.
Speaker 2 (07:43):
Years, five years, So you've got to be very intentional
with what you do. And that's probably our challenge to
clients is all our financial plans need to have that
element of intentionality with them.
Speaker 3 (07:55):
Let's not become successful by accident. Let's do it on purpose.
Speaker 1 (07:58):
So you can't turn around as sixty for and say
I know what I'll do, I'll double the size of
my home and get back in onto the pensions too late,
is it.
Speaker 3 (08:06):
Well, no, we could do that.
Speaker 2 (08:07):
We could definitely do that, because the home is going
to be an exempt asset under undercurrent rules that may change.
Have got to be careful and definitely that's a strategy
that some people have thought is I'll just put more
money into a house. The challenge there now is the inflation,
the inflated price of renovations or new houses. Plush your
stamp duty plus your agent fees selling means that you've
(08:31):
probably to do that.
Speaker 3 (08:32):
You've probably given up a couple one hundred thousand dollars.
Speaker 2 (08:35):
And the reason why you want to still maintain that
you do have a balance throughout your tirement is also
for age care down the road.
Speaker 3 (08:44):
So you don't want to you don't want to leave
yourself with nothing.
Speaker 2 (08:46):
You kind of want to be able to live off
the income, maximize the age pension where you can, but
still have enough that if one spouse needs to go
into age care, you can. The dilemma baby boomers are
going to have around that is that there's probably more.
I went through it with my mum recently and there's more.
There's more people wanting beds that there are beds available.
Speaker 1 (09:07):
I know, yes, almost entirely separate. Sure we could do
on that and I should seem to do it in
the future. Just on just still on this issue about
you said gifting so one way obviously, and none of
these are productive and you can understand why they are.
Under a few folks, and we'll talk about that in
the next segment, tell us about the gifting. What can
(09:28):
you do to get back into the sweet spot?
Speaker 3 (09:33):
Yep, to the sweet spot. Really great question.
Speaker 2 (09:36):
So ideally we can give five years before our entitlement,
you know, but again do it.
Speaker 3 (09:42):
Don't play defense just for defense sake, you give gifts
to it.
Speaker 2 (09:47):
If you had a younger spouse, you could try and
maximize their superannuation instead of yours. Then when you are
of age pension age, your superannuation will be accessible, but
there's wouldn't be.
Speaker 3 (09:59):
So you can be really clever around that.
Speaker 2 (10:02):
You could also something that's probably a little bit future planning,
but when you are looking at what to do is
how you're going to leave your estate, not necessarily to
your spouse, because then as a single age pensioner, if
you left all your money to them, they might then
lose out on the age pension. And you could do
(10:24):
the renovations around the house. You could spend the money
on the holidays and the things that you want. And
that's probably our ideal goal with clients is well they've
got the health, fit and the ability and the want.
Speaker 3 (10:34):
To travel and do all those experiences, do.
Speaker 2 (10:37):
Them while you can, and knowing that if I'll give
a quick case day, like if you had eight hundred
thousand in retirement, and say that's a couple homeowners and
they're accessible. Typically as an advice, we'd say draw down
about five percent of the balance a year, so that
would be forty thousand a year from there. We're assuming
that it's a superannuation income stream from there, and their
(11:00):
age pensioning titlement would be about twenty thousand, one eight
nine a year, So that total would give that person
with a couple with eight hundred thousand, they would get
sixty thousand.
Speaker 3 (11:09):
One eight nine a year. If though that person spent.
Speaker 2 (11:13):
One hundred thousand on the holidays and these great experiences
and memories for life, we would then still say, okay,
now you've only got seven hundred thousand, so draw five
percent of that a year. So they're taking thirty five
thousand out of there. But here's the kicker, Jameson and
something that always amazes me, they would now get close
to twenty eight thousand year age pension in titlement as
a couple. So instead of the sixty one to eight nine,
(11:36):
the one hundred and nine that the couple got with
eight hundred k, the couple with seven hundred k actually
gets close to sixty three thousand dollars a year, so
they get more cash flow even though they've got less capital.
So this is why we're talking about wesson speak throt.
Speaker 1 (11:51):
Maybe it just really spelled us out. They spent one
hundred thousand having a good time and they get more
income because they did that. Hey, we're going to take
a break here because folks, you're going to have to
digest that. And it also does give us something of
a entree to the issue of whether this is all
making sense and whether it should be reviewed. Okay, back
(12:13):
in a moment. Hello, Welcome back to The Australian's Money
Puzzle podcast. I'm James Kirby talking to Hugh Robertson of
(12:34):
Centaur Financial Services and we're talking about the retirement sweet spot.
Speaker 3 (12:38):
Now, if you.
Speaker 1 (12:39):
Could actually believe what Hugh was just telling you in
the first segment about how there are situations where having
less money is better in terms of your retirement income,
that's part one. That's all about the pension assets test.
Now overriding all this, we have this month what they
call the productivity somewhat but which really should have been
(13:01):
called the tax summat and that's coming up pretty soon.
That's Jim Chalmer's big It may be more than just
talkfest in camera, but if you look at it closely,
the submissions that are being met to this are all
about tax, and I would take a sweep and say
virtually half those submissions are about wealth tax and introducing
(13:24):
elements of wealth tax, which can certainly be justified on
the basis that the system is very much tilted in
favor of older Australians and against younger Australians in accumulation phase,
particularly in Super Okay, Now here's the thing. The pension assets,
even the numbers you were putting out there, Hugh, there
are an I can actually zone in on the Department
(13:47):
of Social Services Tania Plippersex Department has had internal advice
that this area should be reviewed and pension asset tests
are likely to be reviewed as part of this summat
could be reduced. Is that a fair assessment of the situation.
Speaker 2 (14:06):
Yes, we've got an aging population, We've got this dependency
ratio used to be four workers to.
Speaker 3 (14:12):
Every one retiree.
Speaker 2 (14:13):
Now we're get into this operation two two and a
half workers two workers. So at some point it's how
are we going to fund an age pension system. We've
probably been the lucky country from resources in terms of
our taxes there, but at some point the wealth tax
is going to come in. I think we all can
(14:34):
see it in one way or another, and I think
that you're also going to it. At some point age
pension will drop down.
Speaker 1 (14:42):
Do you mean you mean the access to the not
so much eat because it's indexed to inflection, but the
access to it will be tightened. Is that where we're
Is that what's on the line.
Speaker 2 (14:54):
I feel it needs to be, because otherwise you're going
to I don't know how you keep taxing young people
when we that affordability is such an issue, has in
such an issue. So we're in a pretty it's a
pretty big pickle at the minute to try and resolve.
So I hope that the people in Cambri can work
hard to solve them.
Speaker 1 (15:12):
I mean, it is it's ludicrous. I mean, the amount
that you can put into super hasn't changed for years,
but the amount you can have tax three and super
goes up all the time. It's two million now, But
the amounts you can put in at the other end,
Paranamus thirty thousand, don't changed. It was thirty thousand ten
years ago. That's the sort of thing that I think
justifiably should be reviewed. It's going to be reviewed, folks.
(15:34):
I think there's two things to understand. I suppose this show.
One is a retirement sweet spot. You heard Hugh's numbers.
Just be aware that those numbers may drop if various
lobbyists and factions that are ready to roll up to
this summit have their way, which is coming up this
month of August. One other thing you mentioned about the
tax about the family home being exempt. So all these
(15:56):
numbers we talk about, we assume the personnels their home
and the home is just not included. Is that right?
Do you think it will ever be included? The value
of the home.
Speaker 3 (16:06):
It's been discussed, it's certainly being discussed.
Speaker 2 (16:09):
And whether it's really difficult, like the price of a
house in Sydney. Does someone get disadvantaged because they live
in Sydney close to their family, part of their community
forever versus someone who lives in Tasmania where the house
is cheaper. Would you then segregate it based off what
state you live in, what region you live in?
Speaker 3 (16:27):
So I the.
Speaker 2 (16:31):
Kind of almost like the div two ninety six and
the issues that we had with that.
Speaker 3 (16:34):
It's how do you actually administer rule rules like that?
Speaker 2 (16:39):
And is it The example that we used to use
was if someone's lived in that house, if there's a
typically women live longer than men's. If there's an old
widow that lives in the house that the family grew
up in and they've been there for forty five years,
but now it's worth five million.
Speaker 3 (16:54):
She's not she should she? So that should she be
penalized for that?
Speaker 1 (16:58):
If she had no cow should be on the pension?
So should her a pension be reduced because the houses
were ten million that she bought it for five nineteen
sixty two?
Speaker 2 (17:07):
Yeah, so you know, that's the equity conversation. He's in
terms of a financial equity, but what's a fairness? So
I can't see it ever, especially with the majority of
voters being of more grayer hair, I can't see a
government bringing that in right, that would be that politically
divisive for them.
Speaker 1 (17:26):
Okay, that's the inclusion of the family home. But interestingly,
you do allow for the fact that they could review
the pension as a test. Yeah, okay, very interesting. We've
got some really good questions. I want to get to
them in a moment before I do. He was a
little announcement to make for somebody.
Speaker 3 (17:44):
I thank you.
Speaker 2 (17:45):
I would like to wish my son, Archer, a happy
eleventh birthday.
Speaker 3 (17:50):
It's an amazing thing. We get to help all these retirees.
Speaker 2 (17:52):
And the one thing they always tell me is never
miss out on your kids growing up, because that's the
one thing you can't get back. So I did ask
James if I could give a shout out to him,
and hopefully he listens to this podcast.
Speaker 1 (18:05):
Well, at least he'll hear. He'll probably hear that he
was mentioned Donald. Well, my story straight off the top
of that about birthdays terribly. I make sure I never
missed a birthday. But I did miss one birthday and
it was my daughter, and it was October two o eight,
and it was the day the world came very close
to collapsing. The nearest thing in my life it leads
(18:26):
to a complete and total financial collapse. Was this Saturday
in October, which was her birthday, and I was being
asked to do so many things. It was a Saturday,
I was on Sunday newspapers and I was on radio
and I missed this birthday party. Two. Wait, so what
(18:46):
was she nine? Well, let me tell you, boy, did
I get it in the neck about that? So I
explained to her, And in recent times she whenever I
bring it up, and I bring it up more than
she does now I say to her, So you see,
it was the most dangerous day financially in the history
in my life. And I'm a financial journalist. So Darling,
sorry about that, but I hope I can never make
(19:06):
it up, but I can explain it.
Speaker 3 (19:07):
All right.
Speaker 1 (19:08):
We'll be back in a moment with some great questions
from George and Bruce and Paul f. Hello. Welcome back
to The Australian's Money Puzzle podcast. James Kirby and Hugh
Robertson here now listener questions. This week, there's a terribly
(19:32):
act question from George. I want to read that first,
Dear James, your article in this week's Australian that the
super inheritance tax can be avoided by withdrawing all your
super money before you die or by a recontribution strategy.
I think there is a third way around this, if
you make a binding nomination in your super fund that
(19:54):
upon your death, your benefit is paid to your estate,
then it is my understanding no taxes payable then. And further,
when the result in super cash is received by the
estate is paid out to the beneficiaries in your will,
no tax is payable then either. Gee, I don't know
about that, but I happen to have a few robertson
in the studio, and he's going to tell us if
(20:15):
that's true, true or false?
Speaker 3 (20:18):
George that he's false.
Speaker 1 (20:21):
I thought I've got a binding nomination on my super
I never thought it could step aside the rules.
Speaker 3 (20:28):
Okay, I liked the question and I like looking at it.
But in terms of what can we do.
Speaker 2 (20:33):
We can withdraw this tell us the day you're going
to die, so we can withdraw it the day before
the recontribution the because ultimately it goes to the end user,
so even it goes through the estate, it will go
through to that. If he is your spouse or dependent,
a tax dependent, then there won't be that's a spouse
child under eighteen dependent in tendency if it's an adult child.
Speaker 1 (20:57):
But in most cases it's adults dependent and they are The.
Speaker 2 (21:01):
One I did we have seen is an insurance equalization strategy.
So sometimes if people know that they're going to have
to pay the tax for whatever reason, or they want
to equalize the estate, sometimes they will have they will
retain their insurance policies and pay that outside of SUPER
and pay that to their children. So again that's not
(21:22):
there's not a tax on that. But again the insurance,
the insurance premiums as you get older prohibitive.
Speaker 1 (21:29):
We'd go through the roof, I thought. So, okay, very interesting, George.
That's not advice. Information only all the Georges in the world.
That's for you to ponder. But I'm afraid if you
thought you found a way around the seventeen percent de
facto inheritance tax on SUPER, that isn't one. It looks
like Okay, there's a question from Bruce.
Speaker 3 (21:49):
Okay, so Bruce has asked.
Speaker 2 (21:52):
A recent guest was not impressed with dividend r reinvestment plans. However,
I suspect the issue is far more complex. Would it
be possible would have a discussion on the pros and
cons of such plans, what can be used instead, and
if any research is being carried out as to how
things are in the real world.
Speaker 1 (22:10):
Okay, thank you, Bruce. Look, dividend reinvestment plans. I think
they're a bit like mortgage mortgages, or by that, I
mean they are a discipline. And if I get my
dividends in cash and it flows into my account, I've
got to make a decision every time, on every dividend,
what am I supposed to do with that money? If
(22:31):
the comp I love the old thought that I don't
know where this came from, but there was that thing
that if something is good enough to have in your portfolio,
it's good enough to reinvest. I's a fact or dividend
reinvestment plans are fine or do you think you.
Speaker 3 (22:46):
Pros?
Speaker 2 (22:46):
Definitely the compound and if you look at even just
the ASX over time, just the price return versus the
price and dividend return, you know that compound and effect
is massive.
Speaker 3 (22:58):
There's a cost of fishing. See you're usually not paying
brokerage when you're invent.
Speaker 1 (23:03):
Less important than it used to be, Yes, but still relevant.
Speaker 2 (23:06):
Yeah, behavioral, you don't have to think about it. But
I do know that a lot of people like to
not do the DRP that even an reinvestment plan. So
because there is the timing of when you actually purchase,
do you want to purchase. Is it an ideal time
to purchase just because the DRP has happened. Sometimes it's
(23:28):
better to keep the money in cash and wait. It
is if you talk twenty accounts out there, and I'm
sure you've got a lot of listeners for accounts, that's
probably the bane of their existence. DRPs and accounting for them.
For our retirees, cash flow can be an impact.
Speaker 1 (23:44):
Of course, yeah, but in accumulation. Look, the other thing
I would say is I have never sold. I have
never closed down a dividend reinvestment plan, but I have
occasionally it has triggered me to sell the share. So
but that comes back to the same thing. If it's
good enough to sign up for a d ORP, then
(24:06):
it's good enough to have. And if it's not good
enough to have a d ORP, a dividend reinvestment plan going,
why are you in that stock in the first place?
That I mean, I think that would be the larger
guide I would just I would put forward.
Speaker 2 (24:18):
That's how we've basically alway, well not basically, that is
how we've done it.
Speaker 3 (24:24):
The only times we've then revalued is if there's concentration risk.
Speaker 2 (24:28):
So probably with bank stocks, we've got some GFC examples
from clients, and that way, we've just accumulated so much
wealth there we don't want to sell. Quite possibly because
of the cgt SO capital gain SAX, SORR, I've got
to stop using acronyms and then so we've tried to
reallocate that money elsewhere.
Speaker 3 (24:45):
But that's really the time, the only time when we
don't do DRPs.
Speaker 1 (24:50):
Okay, we had all day long, nothing else to do,
then you could stay right on top of it.
Speaker 2 (24:56):
There was an ASEX shareholder study and this conclusion was
that investors using DRPs don't track their performance or rebalance portfolios,
which was interesting, and professional portfolio rebalancing with dividend cash
is more flexible and aligned with goals. So I don't
think that really answered much, but it long term DRPs
(25:21):
can outperform obviously when the companies do well, which over
time they always do, so we're a fan of it.
It's simple, it's easy, it doesn't take much mental brain
power to do.
Speaker 1 (25:32):
So that's right, and as I said, it is a discipline.
Hopefully that's useful to you. Bluse Hughes. I thought a
very strong point from view that you're probably not playing
at the idea time. But then on the other hand,
it's recurring.
Speaker 3 (25:43):
Dollar cost averaging, dollar caast averaging.
Speaker 1 (25:45):
It's a bit of it's a dollar cast averaging kicks
in there as a thematic. The final question is from
Paul f. He says, taxi on realize gains has always
been a thing, though in directly so, why is dividend
or division two ninety six been the new super tax
so controversial? Well, it was never There was never unrealized
(26:11):
gains tax in your super before Paul left, So I
suppose that's what it's really all about. Okay, you can
bring out the issue of land tax or whatever in property,
but it was never a case in Super. And the
big question is if it's in Super, where it does
it go next. We'll have to leave it there. Let's
have some questions on that, Let's have some comments on that,
and I hope you found the retirement sweet spot well
(26:35):
worth thinking about understanding. And keep in mind that that
act that first of all, the majority of Australians, the
majority of retirement age, have either an age full age
pension or part pension. The issue is the access. The
access by some criteria has been relatively generous and it's
(26:56):
something that is now going to be I think seriously
reviewed in the weeks ahead, this Productivity slash Wealth Tax summit,
which is coming up in a few weeks. Hugh Robertson,
thank you very much for being on the show. Great
to have you as always.
Speaker 3 (27:08):
Thank you very much, James. I really enjoyed today.
Speaker 1 (27:12):
Really good.
Speaker 2 (27:12):
All right.
Speaker 1 (27:13):
The email is the Money Puzzle at the Australian dot
com dot au And also before you go, one other
thing coming up in the next few weeks where we
have a short series where we get some luminaries in
the financial space to talk about how they made their money.
That will be presented by Julianne Sprague and it starts
(27:34):
Monday Talk soon
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