Q&A: Should I use our super as an income or have a pension? 10



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I’m about to turn 60 and am trying to understand retirement options, especially with the latest changes in the budget.

Although my wife and I are very keen to leave the rat race ASAP our original plan was to get as much money together prior to retirement in order to have a comfortable lifestyle. In order to do this we would continue to work and accrue superannuation. I also understand that the government is keen to keep people in the workforce for as long as possible so thought this approach would be rewarded.

However the latest government’s changes seem to me to encourage us to get out sooner rather than later. Here is my thinking. Assume we currently have $820,000 in superannuation.

According to the ASIC Money Smart site a couple needs $58,275.45 a year for a comfortable lifestyle.

The full pension pays out $33,716.80 per annum (this includes the Pension Supplement and the Energy Supplement).

If we had $375,000 in superannuation (the maximum a couple can have and also receive a full pension) this should return and average of $25,500 a year, based on the average return on superannuation schemes of 6.75%. (I know returns are lower than this at the moment but presumably this will recover). So overall this will give us $59,216.80 which is slightly above the comfortable lifestyle.

However, with $820,000 in superannuation we won’t get any pension and using the same rate of return this will return $55,760.00 which is below the comfortable lifestyle.

So, doesn’t it make sense financially to retire early drawing down the capital until it is at $375,000 and then we are entitled to the full pension (Obviously we will be getting financial advice before making our minds up)?



I can’t argue with your maths, or your interpretation of recent changes to the assets test for pensions. These changes certainly squeezed the ‘middle ground’ making it hard to get a part-pension.

But a successful retirement and being money-smart is about more than just the maths. Every financial successful person I know understands the value of having choices – and by having investment capital (money in your superannuation) you have a whole lot of choices available to you that someone on a full pension doesn’t. You may be challenged right now trying to achieve an equivalent rate of return as the pension, but you keep your options open to be able to live the life you want to in 20 years’ time, or leave a legacy for your family.

I would encourage you to stick with your original plan. If you were both able to put $35,000 each per annum for another 5 years, you would be looking at having around $1.2m when you are a young 65 year old. That to me sounds like a much better plan to set you up for 70s and 80s than pulling up stumps now just to get the pension as soon as you can, and having no option but to rely on the government for the rest of your life.  

Patrick Canion

Patrick Canion’s passion for financial planning reflects his strong views that all people are created equal and everyone is connected in some shape or form. As a prominent financial commentator and CEO of ipac Western Australia, Patrick is committed to providing the very best financial advice to people from all walks of life ensuring they are in control of their financial destiny. www.ipacwa.com.au

  1. I would be very careful what you do, this Government keeps changing the rules , it only leads to worry and uncertainty for those of us who have retired or are about to retire

  2. Agree David. Keep working if you can, unless you have a return from real estate investments……otherwise the pot quickly goes down.

  3. Already retired, early due to health, . Government moving the goal posts is very concerning , as we will not be able to get part pension. Money will run out sooner & will be on full pension. Doesn’t seem to make sense??
    We also do not intend to leave anything behind, as I understand many cling to houses etc, to pass on to kids, therefore making it a bit unfair to claim pension

  4. Governments keep changing superannuation and pension rules, some of which may be applied retrospectively. As I have just discovered and will lose my small part pension on 1st January 2016 based on changes to the pension income test. My advice is to as far as possible provide for your own retirement.

  5. The previous labor Government did more to damage the retirement plans of many by making unannounced changes to superannuation than these minor tweaks to the Pension. They lied in Government and they lie in opposition.

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