Centrelink Q&A: Are funeral bonds counted as an asset?

YourLifeChoices member Dorothy wants to know if Centrelink considers funeral bonds an asset when applying for the Age Pension.

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Q. Dorothy

We have recently purchased funeral bonds (FuneralPlanBonds Australian Unity), hoping to reduce our assets. Are funeral bonds regarded as assets by Centrelink?

A. Paying for your funeral costs in advance can be a comfort for you and your family, but they can also affect your eligibility for the Age Pension.

According to Services Australia, funeral costs you pay in advance ‘normally don’t count’ in your assets test for pension payments, but there are exceptions and, unfortunately, for Dorothy some of those exceptions are for funeral bonds.

But first, what are funeral bonds?

A funeral bond is an investment to allow you to set aside money to cover your funeral costs.

According to the government website Moneysmart, you pay a deposit and then make regular payments over time and your money grows with interest.

You can buy a funeral bond from a funeral director, friendly society or life insurer.  

The current bond threshold is $15,500, and that figure is adjusted each July in line with the cost of living.

Funeral bonds can have any of the following to be exempt from being included in the Age Pension assets test: it must be assigned to a funeral director, must be for fully prepaid funeral services and must have a contract that sets out the services and says it’s paid in full.

Unfortunately for Dorothy, as it looks like her bond is with a friendly society instead of a funeral director, it may be counted as an asset under Centrelink rules.

You must inform Centrelink of any funeral bonds you have, even if you know it is exempt from the assets test rules.

If you are considering prepaying some of your funeral expenses, Centrelink does not include burial plots in the assets test.

Dorothy should contact Centrelink and talk to a financial adviser to clarify the situation.

To contact the service, use the same number you use to contact Centrelink and say ‘financial information service’ when asked why you are calling.

If you have a Centrelink question, please send it to [email protected] and we’ll do our best to answer it for you.

Also read: Centrelink Q&A: Carer has concerns for her future

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.