While honesty is the best policy when it comes to dealing with the government, there are a few simple ways to maximise your Age Pension payment.
Your eligibility is assessed using two methods, the assets test and the income test, which are combined to determine if you are eligible for the pension and how much your payments will be.
The assets test takes into account all your assets, including personal assets such as cars and jewellery, and the income test assesses such things as interest on bank accounts, returns from shares and superannuation.
Here are a few tips to maximise your Age Pension payment.
Review your personal assets
How long has it been since you valued your personal assets? Centrelink views such items as jewellery, laptops, cars and boats as personal assets and part of the assets test.
While you might have been valuing these under ‘replacement’ value in your insurance, i.e. the cost it would incur to replace the item, Centrelink is only interested in the market value, or what you could reasonably expect them to fetch at a garage sale, on eBay or Facebook Marketplace.
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The difference in the two values can be considerable. Start looking online at similar items to see what price they are fetching. Antiques and collectables may have lost a lot of value over the past decade or so, but that might qualify you for the pension or boost your payments.
Vehicles and electronics depreciate very quickly, so once again it might be worth heading online to check their resale value and updating their worth every year.
If you were not eligible for the Age Pension on retirement, it’s quite likely that as you age, and the value of your assets decline, you might become eligible for at least a part payment.
Renovate your home
As your principal home is exempt from the assets test, it pays to move money into it. If you have cash in the bank, it could be beneficial to spend it on renovations. This removes the cash from being assessed under the income and assets test. In the long term, spending the money now could also be a good investment to avoid future maintenance costs, including making it more suitable for senior living.
Give it away
If you can afford it, giving away money can be a canny strategy as once again it reduces the amount assessed by Centrelink. However, there are some very strict rules about gifting. You can only give away $10,000 in one financial year or $30,000 over five financial years, and no more than $10,000 in one financial year.
But think very carefully about this strategy as it may set up expectations among family and friends that you are little more than a walking ATM. Be clear about your boundaries. Also, as people live longer, many are underestimating how much they need in retirement, so it could be more advisable to save the money for later.
Read: Seven tips for living well on the Age Pension
Shift super
If one partner is eligible for the Age Pension and the other isn’t due to age, and are still working, you may be able to shift some super to the younger partner’s account, thus reducing the amount of money that can be assessed for pension payments. However, there may be some tax implications and it’s worth getting some professional advice before you go down that route.
Prepay your funeral
No-one takes any joy in this, but putting feelings aside and prepaying your funeral can have financial benefits, and not just for those left behind.
Funeral costs paid in advance don’t normally count towards the assets test. You will need to meet a number of conditions, but it could have the double appeal of giving peace of mind in the future that your funeral will be covered and increase your pension payments.
Talk to a financial planner or funeral director about options.
You could also invest in a funeral bond. A funeral bond is an investment offered by a friendly society or life insurance company to allow you to set aside money to cover your funeral costs.
A funeral bond provides benefits only on the death of the nominated person and cannot be accessed earlier.
Read: Common retirement mistakes and how to avoid them
According to Services Australia, your funeral bond won’t count as an assessable asset if any of the following occur:
- you have assigned it to a funeral director
- it’s for fully prepaid funeral services
- you have a contract that sets out the services and says they’re paid in full
Centrelink won’t include the value of up to two bonds as long as:
- you don’t also have prepaid funeral expenses
- the amount you’ve invested in the bonds is under the Funeral Bond Allowable Limit.
The current limit on funeral bonds is $13,500.
Centrelink also doesn’t include the cost of a burial plot in the assets test no matter its value and you don’t have to inform Centrelink you own one.
Pay down your debts
Story Wealth management senior financial planner Anne Graham told canstar.com that most debts are not offset against assets for means testing.
“So, if you have a loan secured against your home or even credit card/personal loans, it makes sense to pay down debt,” Ms Graham says.
Apply early
Most people think that once they are eligible, they apply for the Age Pension, which of course you can, but it’s not backdated to your eligibility date.
Payments start when you lodge the claim, not when you are eligible. You can apply 13 weeks before you are eligible and payments can start as soon as you turn the correct age. It’s a good idea to start early anyway as the process can be time-consuming.
Have you employed any of these tactics to qualify for the Age Pension or boost your payments? Do you have any other tips? Why not share them in the comments section below?
