Q: I’m a 65-year-old woman who’s been on a Disability Support Pension for the past eight years, with no other income. My superannuation will become part of my assets when I turn 66, but the total assets amount will not impact on my pension. I have cash in the bank, however, which I now realise I cannot put into superannuation. My question is that, given the downturn in interest offered by the bank, would it be advisable to keep my superannuation untouched and working for me and to draw on my cash in bank for any extra cash I may need?
A: Once you reach pensionable age, it would be wise to move your superannuation fund to pension mode, otherwise the fund will be paying 15 per cent tax from dollar one on any investment earnings made. Once your fund is in pension mode, it will be in a zero-tax environment, but you will be required to draw 5 per cent of the balance every year (the current minimum drawdown requirement is lower but that is the case only in the 2019-20 and 2020-21 financial years).
It looks like your best strategy would be to move the fund to pension mode once you reach pensionable age, not before, withdraw the minimum pension and make up any shortfall in income required from your cash savings.
Q: At this point in time, my husband and I receive an annual dividend from a trust fund set up by our son. The final dividend we receive will be for the 2019-20 financial year and we will be claiming the Age Pension from mid-September when my husband retires. Our question is whether previous dividends we have received from the trust be taken into account when we claim the Age Pension in September 2020? Our question mainly refers to the final dividend to be paid for 2019-20.
A: The value of all financial assets such as shares, cash in the bank and investments in managed funds will be used for the assets test, so yes, money received as a dividend from the trust will be taken into account if you continue to hold the money as an asset. The deemed income from your financial assets will also be used for the Age Pension income test. The tests that gives you the lowest pension will be the one used. I suggest you check out the calculators on my website www.noelwhittaker.com.au to see how your assets may impact your pension.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial situation, objectives or needs. That means it’s not financial product advice and shouldn’t be relied upon as if it is. Before making a financial decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services advice.
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