When will the minimum super withdrawal rate return to normal?
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My question is about the mandatory drawdown rates for people who have their superannuation in pension mode. These rates were halved due to COVID, and I’m wondering if they will be continued after June 30.
There has been no specific announcement, but the industry believes they will revert to normal. The changes due to COVID were made by special legislation which expires on June 30.
The government would need to make a special announcement before 30 June, and they did have the option to do this in the budget. Given there was no mention of any changes, I believe the status quo will be restored.
There has been no specific announcement from the government, but it’s expected the pandemic changes to super mandatory drawdown rates will be reverted.Credit: Louie Douvis
Apart from our home, our only assets are cash in the bank and a rental property. I am trying to work out if we are eligible for a part-age pension. What is the cut-off point of assets which prevents us from receiving any government pension?
You will be tested under an income test and an assets test and the one which gives you the lowest pension will be the one Centrelink will use. Financial assets such as shares, bank deposits and superannuation are subject to deeming.
The market value of a rental property is assessed for the assets test and the income counted is what it was on your tax return. Keep in mind if the assets test produces the lowest age pension, then any income counted is not relevant. The assets test cut-off point for a homeowner couple is $954,000, which includes personal effects, which should be valued at their second-hand value.
Earlier this year, I opened a Superannuation Pension account and used the full transfer balance cap (TBC) of $1.7 million. Now I understand the TBC is likely to be increased in line with inflation to $1.9 million. Is it a valid and reasonable strategy to roll the $1.7m back into the accumulation fund, therefore recovering 100 per cent of the TBC, and then shift it back into the pension fund after the $1.9 million limit becomes effective?
If it sounds too good to be true, it probably is. The transfer balance cap is a once-in-a-lifetime opportunity – having used up the $1.7 million cap previously, you can’t benefit from it rising to $1.9 million. For you it remains locked at $1.7 million
My husband is in care for a year with Parkinson’s. We are part pensioners. Initially, I was told he would be a concessional resident by Anglicare. Since then, a fee of $40 a day has been applied in addition. We do not own a home. My rent is $2500 per month. I receive a teacher’s pension from the USA of $US2500 and have received a gift from my sister of $US130,000. The gift is in my name with beneficiaries of our two adult daughters should I die. To pay the aged care fees means digging into the gift from my sister. To do so would render me in time requiring a full pension when all the money is gone. Why do homeowners not have this problem? Can you advise?
Aged care guru Rachel Lane explains that the amount your husband pays for his cost of aged care is based on half of your combined assets and income. Many people wrongly believe that because aged care is means tested that it is affordable. That’s simply not true. For many people living in aged care (whether they are homeowners or not) the cost exceeds their income.
As a low-means resident, the means test will assess your husband’s half of the assets and income using 50c per dollar of income above $30,568 and 17.5 per cent of assets between $57,000 and $193,219. Income includes your pension from the USA, any age pension and income from your investments.
While the gift from your sister goes to your children when you pass away, it is currently your asset and half is assessed as your husband’s. The $40 per day is a Daily Accommodation Contribution (DAC) towards the cost of his accommodation, the government provide a supplement to top up his accommodation contribution and while he is paying a basic daily fee of $59 per day towards his cost of care the government are providing supplements on top of that too.
If you wish to be assessed on the basis of what’s mine is mine and yours is yours (removing your assets and income from his assessment) you can look at being classified as a couple who are “separated and living apart”. This can have significant financial consequences, not all of which are positive, so you should seek specialist advice before going down this path.
Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: [email protected]
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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