Education videos

Well, welcome everybody to this webinar about preparing for your retirement journey. My name is Peter Treseder, I'm an Education Manager at AustralianSuper and I've been helping AustralianSuper members for the last 25 odd years and with me to help me with the content today I have a fellow Education Manager, Michelle Kelada. Hello Michelle.

Hi, Peter. Great that you could join us on this topic that it comes for us all sooner rather than later for some. But the earlier you start preparing, I think that's the best way you can set yourself up for that retirement you're after.

So AustralianSuper recognises and acknowledges the traditional custodians of the land of which we work and we pay our respects to their elders past, present and emerging. And we extend that respect to all Aboriginal and Torres Strait Islander peoples. Our head office in Australia, AustralianSuper is on the land of the Wurundjeri people of the cooler nation. And today Michelle and I are speaking from the land of the Bunurong and the Wadawurrung people.

What Michelle and I are talking about today is general information. We don't know your personal situation, objectives, needs, etc. So before making any decisions, please read the Product Disclosure Statement and Target Market Determination. These can both be found on the AustralianSuper website.

So planning for retirement? I suppose it starts with, well, what age do you want to retire? Before 60? Somewhere in your 60s. A little bit later in your 60s. Most people like the idea of retiring earlier rather than later. Most people plan for retirement around 65. But there are some key retirement dates, some milestones on that journey to retirement, and they are 60, 65 and 67. 60 is the age that you can access your super if you've ceased an employment arrangement, 65 you can access your super if you're working or not working, and 67 is the qualifying age for the government age pension. So those dates, 60, 65 and 67 may give you some guidance around when you want to retire, but more when you can access income in retirement.

And we're going to talk about the sources of income you may have in retirement. So it means starting this journey to retirement and most of us start this journey the same way. We followed the same steps and that are, well, what is retirement going to look like for me? What am I going to be doing in retirement? What am I planning for? And once I've worked out what I'm planning for, how much do I need to tick those things off my bucket list? Where's that income going to come from? Because in my working life, this is retirement. This is my working life. Money's going in the bank. Once I go past retirement, there's no future source of income. I've stopped work. Where's my income going to be coming from in those retirement years? And am I on track to get that level of retirement or that retirement income that I'm aiming for? If I'm aiming for a retirement income of that high, am I in the right place now to be able to get there? And if I'm not, what action can I take to improve my situation, put myself in a better financial situation when it comes to retirement?

And I suppose, Michelle, this is where we asked the question. Go back to that first number one here. What does retirement look like?

Great question, Peter, and I'm glad you asked. And often what we find is that people start planning for retirement at Step 2 of the journey, which is do I have enough? But the really important thing to do is actually start with how am I going to spend my time once I've stopped working? What does that time look like? If I was working from the hours of nine to five and working full time, well, how am I going to fill that time once I've stopped working or once I start easing into retirement? If I plan to travel well, what do those travel plans look like? Does it look like domestic travel or does it look like regular overseas holidays? Is there some form of work involved? We know that retirement has evolved for Australians over the last few decades and often retirees now are looking to do some sort of work in retirement. Not always, but some are looking to do some sort of volunteer work or perhaps even a career change as they start thinking about retirement or moving into that next stage of life.

So it's really important to start thinking about how you are going to fill that time once you've stopped work as you know it. My mum helps with my children and she is semi-retired and while she really enjoys doing that, that isn't for everyone. So it's important to think about how you're going to spend that time but also share those plans with your loved ones as well. As you start thinking about what retirement's going to look like because it does look different for everyone and how you spend your time is going to directly feed into the next part of that. Starting to plan for your retirement journey, which is how much will you need? This is going to look different for everyone. If I met someone that was planning to spend 6 months of every year travelling overseas in retirement, compared to someone that perhaps wanted to hitch up the caravan and do a trip around Australia. Well they're going to have really different income needs. And you've probably heard ideas thrown around of how much you might need in your superannuation to be able to retire comfortably. But the reality is that this looks really different for everyone depending on what Step 1 looks like, how you are going to spend that time.

ASFA who is the Association of Super Funds in Australia, they survey retirees to work out on average what they are spending in retirement and they broke it down into two measures. So they've broken it down into a modest lifestyle in retirement, which we'll look at first, which is essentially designed to provide a level of income that is a little bit more than what the age pension offers. The full age pension in Australia and is designed to cover the necessities. Perhaps a little bit of domestic travel and just really cover off on the basics and look at having quite a modest lifestyle in retirement. You can get an idea on the screen of the types of things that may or may not be included in a modest lifestyle, perhaps basic private health cover, a takeaway meal every so often as well. Then what they've also shown us is how much retirees in Australia are spending that are looking to have a more comfortable lifestyle in retirement. This might include regular domestic trips, having an overseas trip irregularly, staying connected with family and friends virtually and a number of other things as well. So these figures are designed to give us a little bit of an idea as what retirees are spending in Australia. But this again, is going to be different for everyone. And there are also a number of assumptions that sit behind these standards, things like home ownership in retirement. So you can look these up yourself online to get a little bit more of an idea of the types of things that are included in these standards. But these are designed to give us a bit of an idea on what retirees in Australia are currently spending. But it's going to look a little bit different for everybody.

This here is showing us how the full age pension in Australia compares to the ASFA retirement standards we just spoke about. So as you can see, there is a little bit of a gap between the full age pension, which is on the far right hand side of the screen and what it entails to have a comfortable or modest lifestyle in retirement. And this is where your own savings, perhaps your superannuation or other assets can help to fill that gap to give you the type of income that you might need in your own retirement.

So where will your income come from? So we've spoken about how you're going to spend your time in retirement. We've spoken about how much you might need being dependent on how you've decided you're going to spend time. And the next part of planning for your retirement journey is starting to think about, well, where is that income going to come from in retirement? Peter spoke about those key retirement milestones. So superannuation being accessible from preservation age, which is 60. And superannuation is one of the building blocks that forms retirement income in Australia. So that's one of the sources of income that we see retirees tapping into once they've start reducing their working hours or moving into the retirement phase. We've also got the government age pension, which Australians are eligible to apply for at the age of 67 in Australia. Then we've got our own savings. So our own savings can form part of our retirement income and then if we've got other investments outside of superannuation then this can form part of our income or the building blocks of our income in retirement as well. Currently in Australia there is a high number of age pension age Australians receiving some form of age pension, whether it's a full pension or part pension. And often these people are topping up their age pension with the other the other items we can see on the screen. So things like your superannuation, your savings or other investments. The part that can be sometimes difficult to navigate is the timing of these payments because they often come in at different times. We're often used to being paid in regular intervals, whether we get paid weekly, fortnightly or monthly as employees. But moving into retirement can be a little bit different and somewhat of an unknown quantity because often these payments can come in at regular irregular time. So that can be a little bit of getting used to. But this is when we start to look at the different source of income in retirement and starting to again think about those key retirement milestones and when we start to become eligible to use different types of income sources in retirement. Obviously our superannuation, we know that we can start to access that from 60. Government age pension is 67, but our own savings and investments we may be able to access sooner than that. So this is where starting to plan early for retirement, depending on when you plan to retire, what that looks like can be fundamental in being prepared for your own retirement.

Thanks, Michelle. I do like the idea of building blocks. I'm after this level of income. What building blocks have I got to get me there? And when am I eligible for those building blocks? Because if I'm retiring at 56 or 57, because there's no retirement age in Australia, you can retire whenever you want. My super building block isn't available till I'm 60.

The pension super block is not available till I'm 67. So you're right, there are some key dates, there's some key strategies to think about. And you're touched on the government age pension. For the majority of age pensioners in Australia who are eligible for the age pension, the majority of them, their biggest source of the income is still the government age pension. And as you mentioned, super tends to top that off.

So we started with some figures from ASFA a line in the sand. What we're going to look at now is a case study and our case studies about Sam and Lucy. Now this is just a line in the sand, a way to start to get you thinking about your situation. You may be exactly the same as Sam and Lucy. I highly doubt it, but at least we're putting a line in the sand and you can think in your situation how you may differ.

So Sam and Lucy, both 58, they're both working. Lucy's working part time, so she might be like your mum, I think Michelle, doing a bit of looking after the kids and working part time. They've both got some money in super, they both want to retire at 63. So they had that discussion about what retirement's going to look like and it's starting from 63. They've worked out what that retirement funding is needed at $75,000. They've got some money in the bank if they put those numbers into a calculator and most superannuation funds have a calculator. You can look at the Australian super one online. They put in their age, their income, what they've got as assets, what they've got in super, into a calculator. This is the story it prints out or spits out for Sam and Lucy.

So it's saying at 58 now they've got $450,000 in super if they let the system work for them. So that's the compulsory contributions. Their employer has to pay in 11.5 % this year, 12% from the 1st of July next year. By the time they're 63, their super balance has grown to $585,000. They're now retired. They're not eligible for the government age pension. They're eligible to access their super. So their super payments are going to fund that $75,000 lifestyle for the first four years of their retirement because at age 67, they're now eligible for the age pension. They can go to Centrelink and apply for the pension. And Centrelink is such a vital part of this journey to retirement. It's going to probably provide you with income. How much and when are important is important information you need to know for your retirement plans.

The pressure now is off to some degree. Sam and Lucy's super because the age pension is now going to provide the majority of that $75,000. But their super runs out at 82, so their super finishes at 82. Their lifestyle becomes now funded by the full pension, so their income is the full pension amount and that may change their lifestyle. They may be happy with that change of lifestyle. They may have ticked everything off in their bucket list in the early years of their retirement, but life expectancy for Sam and Lucy is 85, so it's not a bad story. They're not in a bad position. They've got a retirement that they're aiming for that's going to last them a number of years but won't last them through to life expectancy and beyond. And most financial planners, when talking to someone about incoming retirement, would plan five years, typically beyond life expectancy.

So not a bad story, Michelle. What could they consider to improve their outcome? Well, some of the things that Sam and Lucy could consider is working a little bit longer, which they may or may not want to do. They could consider reducing their retirement income needs, so perhaps reassess how much they are going to spend in retirement, which may lead to their superannuation and other assets lasting a little bit longer as they move through that retirement journey. Sam and Lucy could also consider making extra contributions into superannuation while they're still working. They are currently 58 years old. We know they want to retire at 63, so they've got a good five years to really make their assets and their income work for them to ensure they can get the best possible outcome for themselves in in retirement. So they could start consider considering putting a little bit extra into superannuation.

And when we're thinking about putting extra into superannuation, broadly there are two categories that we're looking at. We can look at putting money into superannuation before tax, which is also referred to as concessional contributions and this has an annual cap of $30,000 per year. Then we've also got after tax contributions or non-concessional contributions and these have an annual cap of $120,000 per year. Let's break these down a little bit further. So let's firstly look at the concessional or before tax contributions.

And the simplest way to think of this is any money that's going into superannuation before you receive it or before you pay tax on it. The important part here is that this includes the Super Guarantee. So the amount that your employer is putting into your superannuation on your behalf counts towards this $30,000 annual cap. Salary sacrifice contributions also count towards your concessional contributions cap as well as tax deductible contributions. When money goes into superannuation before tax, it's generally taxed at a flat rate of 15% depending on your level of income when it goes into superannuation rather than paying your personal tax rate. So depending on your level of income, there can sometimes be tax benefits in getting money into superannuation under the before tax limits. We've also got catch up contributions available for some people depending on eligibility criteria, and this is where you may be able to accrue unused concessional cap amounts for up to five years. And this could help for those that have potentially taken time out of the workforce and haven't contributed actively to their superannuation over the past financial years. But essentially the way it works is that if in the previous five financial years you didn't fully utilise the contribution cap at the time, you may actually be able to go back and utilise those unused limits. There are eligibility criteria of course, like most things and one of those is that you need to have a super balance below $500,000 on 30 June of the previous financial year to have eligibility criteria. And I'll talk in a moment about where you can go to check if you've got eligibility for using catch up contributions under this carry forward rule.

Let's have a little bit of a look at how this works in practise. So here's a bit of an example and just bear in mind here that we're starting with the 22/23 financial year. So you can actually go back five years, but just for the for the purpose of the example, we're starting in the 22/23 financial year. Now in that year, the concessional contribution cap was $27,500. So if in this example, we've got a member that's contributed $10,500 through compulsory employer contributions, which would mean they had $17,000 that they didn't utilise in that financial year, which would then carry forward into the 23/24 financial year and add to the general annual cap, which was again $27,500, giving this individual now $44,500 that they are able to contribute to superannuation under the concessional contribution cap. Again, their employer has contributed to super. This has gone up slightly because the Super Guarantee went up in this year. So that's decreased what they've got available. They now have $33,500 remaining, which will carry forward into the current financial year we're in now where the annual cap is $30,000. So if we add the $33,500 they had remaining last financial year to the $30,000 cap that we have in this financial year, this would give this particular member $63,500 that they have available under the concessional contribution cap and carry forward rule. So this particular, in this particular example, this person has gone and made a tax-deductible contribution, so contributed the some of their own money or savings into super and claimed it as a tax deduction. And in this example, we've used $20,000. So you can see that how that's reduced their total concessional contributions down together with their employer contributions and they now have $32,000 remaining and this goes on a rolling five year basis. So it's accumulates for five years at a time and it goes on a rolling five year.

I mentioned where you can go to check if you've got eligibility for the carry for the use of the carry forward rule and how much you have available. And MyGov is really your source of truth when it comes to understanding your eligibility for things like the carry forward rule. So as we can see here on the screen, if you visit MyGov and go into the Australian Taxation Office portal, you will have a drop down section for superannuation. If you hover over the information section, you will see carry forward concessional contributions and if you go in, yeah, it's going to tell you whether or not you are eligible and how much you are eligible to utilise when it comes to the carry forward rule. It's really important here to think about or understand your marginal tax rate when it comes to utilising the carry forward rule and concessional contributions because the amount of income you're earning is going to determine or help you to determine the type of benefit there might be from a tax perspective. If you are thinking of increasing your concessional contributions to super.

Let's move across now on to non concessional contribution. So we've spoken about putting money into superannuation before you pay tax on it. Now let's look at putting money into superannuation after you've paid tax on it. So this could relate to things like savings you've accumulated in the bank an inheritance you've received, proceeds from the sale of an asset, or even spouse contributions, which I'll unpack a little bit as we go. But when money goes into superannuation after tax, importantly there is no tax on the way into superannuation because this is taxed money, it's money that's already been taxed or considered from a tax perspective somewhere along the way. And the annual cap for non-concessional or after tax contributions is currently $120,000 per financial year.

Now we spoke about before tax contributions and the ability to go back up to five financial years, but with after tax contributions, you may actually have the capacity to go forward up to three years worth at one time and this is called the bring forward rule. So again, if eligible and there are eligibility criteria for this, you may be able to put three financial years worth of contributions into superannuation all at once. This could be really valuable for those that perhaps may have received an inheritance or sold a large asset and give them the ability to put up to $360,000 in which would be this year's annual cap, next year's cap and the year after all at once. It's important to remember that if this is something you are considering, it does lock you into the Bring forward rule and you mightn't be able to make any additional contributions to super after tax under the non concessional cap for the next two financial years. So that is something to be aware of. Eligibility does depend on your total super balance and the cut off age for the Bring Forward rule is 75.

Spouse contributions also fall under non concessional contributions and this is where if you contribute to your spouse's superannuation account and they are on a lower income or perhaps working part time or not working, that you may be eligible for a tax offset by contributing into your spouse's superannuation account. So the full tax offset that you can receive is $540 currently and that can be, you can be eligible to receive that on up to a $3,000 contribution into your spouse's account. Your spouse must be under the age of 75 to be eligible for that tax offset. But this can be a way to not only help grow your spouse or partner's superannuation account, but again, if you're eligible, also receive a little bit of a tax offset, which could be helpful as well.

The government co-contribution is also something to bear in mind and consider. And this is where for every dollar that's contributed to superannuation after tax, you may be eligible for a government co-contribution of $0.50 up to a maximum of $500.00. So again, there are eligibility criteria that apply to this, but to be eligible for the full government co-contribution currently you need to have an annual income of less than $45,400 and then it does start to taper off up to an upper limit. So I do suggest referring to the ATO website for a little bit more information on the eligibility criteria and limitations here, but this could be something worth considering as well.

Now, the downsizer contribution is a little bit different. We've spoken about the before tax contribution limits and the after tax contribution limits, but the downsizer contribution actually sits outside of those limits and doesn't count towards any of those contribution caps. This is for those that are over the age of 55 and have downsized their home. There are eligibility criteria for this like period of home ownership and you can find these by looking at the ATO website. But essentially what this would allow someone eligible to do is contribute up to $300,000 into superannuation from the sale of your home. If you are a member of a couple, this is $300,000 each. So it could be up to $600,000 for a couple to be able to contribute to super if they met the eligibility criteria for the downsizer contribution. And this does fall outside or separate to the caps that we've already spoken about.

Thanks, Michelle.

And look, it is a matter of have I got spare money to put into super? If I do, how do I get it in in the most effective way? And Michelle's gone through a number of different examples here. And there's more information on AustralianSuper website australiansuper.com/grow. So there's a lot more information there to help you determine how to get that money most effectively into super. And of course, you may want to seek financial advice.

Well, Sam and Lucy went and got some financial advice and they're going to take advantage of all the rules, all the provisions that Michelle spoke about. So Sam's going to make a one off tax deductible contribution to the Super. He's going to start salary sacrificing into super. He's going to put some money into Lucy's super as a spouse contribution and Lucy's going to put some of her own money into super as an after tax contribution because she'd be eligible for the government co-contribution. So they're going to do all this for the next 5 years.

So how does that change their future? Well, their start point is no different. They're still 58 and they've still got $450,000 in super. But with the extra money going to super over those five years, when they get to the age of 63, they've now got a bit over $700,000 in super. It has really pumped up their super in those five years. They are still going to fund those first four years of retirement out of their super because even though they've got more super, they're not eligible for the age pension still at age 67. So at age 67, they can apply for the pension. They've received some pension. As I mentioned before, having some pension income takes the pressure of the amount they need to draw off their super as income. So now we see that their super goes beyond life expectancy. That $75,000 income that they were looking for now goes beyond life expectancy. And this may open up other ideas or other options for Sam and Lucy. They might retire a little bit earlier. They might draw more down. All that does is gives them more flexibility to what they want to do down the track when it comes to retirement.

So having that retirement aim, seeing if they're on track and in the case here was a good story. Now with a bit of advice, extra contributions into super has made it a really good story. So the advantages of the benefits of the advice they got about contributing meant that Sam paid less tax in the first year, a bit over $6000 less. Lucy's getting $500.00 from the government. They're super accumulation has gone up by over $120,000 and that super has lasted an extra nine years, or that more they had in super has allowed them to have that $75,000 lifestyle for an extra 9 years, taking them beyond life expectancy.

So in Sam and Lucy's situation, they had the ability, they had the resources to put more money into super Michelle. What if I'm not like Sam and Lucy? What if I need every dollar I'm earning? Are there some strategies for me to still boost my super? Great question, Peter. And you're right, Sam and Lucy was an example of where they actually had capacity to put a little bit extra into superannuation based on their situation. But we know that's not the case for everyone. Not everyone's got that little bit extra laying around to boost their superannuation, and there are strategies that people can look at or consider when they don't have that additional cash flow to boost their superannuation.

And one of these is called transition to retirement, which I'm going to refer to as TTR for the remainder of the session today. So TTR was introduced in around 2005 and it was introduced as a way to allow people to start to transition into retirement. So work a little bit less. So perhaps someone once meeting their preservation age is thinking, well, I want to keep working, but I don't want to keep working in the same capacity that I have been. Perhaps you're working full time and looking to start reducing your working hours, but you know that if you reduce your working hours, then you mightn't be able to meet your income needs any longer. So TTR was introduced as a way to allow people to begin accessing their superannuation while they're still working to top up their take home pay and start to ease or transition into retirement.

Now TTR can also be used to help you save more. So it can be used as as a strategy to help grow your superannuation faster and potentially payless tax depending on your situation and give you a regular income from your superannuation. And we'll start unpacking how that works in practise now. So how does TTR work? Well, we know that your employer makes those regular contributions into your superannuation under the Super Guarantee and your income is paid into your bank account. Now, in order to start a TTR account, you do need to transfer or move some money from your super accumulation account across into a new account called a TTR Income account at Australian Super. To start a TTR Income account, it does need to have a minimum balance of $25,000 and it's important to remember that you need to leave your existing superannuation account open and active to receive those regular contributions from your employer.

Once a TTR income account is set up, there are limitations on this account. So under the TTR rules, you are limited in drawing 10% of the balance of that TTR out per financial year. And if you are under the age of 65 when you start a TTR, the minimum drawdown requirement rules specify that you must draw at least 4% of that balance out per financial year. So you are limited in how much can come out, but it can mean a regular income being paid into your bank account and this can be at different intervals depending on what your preferences are. Once that money is sitting in your bank account, it can allow you to do some of those things we spoke about. Perhaps reducing your working hours and having your income topped up from that TTR. Or perhaps allowing you to have extra cash flow to be able to re contribute back into super as salary sacrifice, which can in turn lead to a reduction in tax, which can help to grow your superannuation.

And to help unpack this a little bit further, we're going to go through an example or a case study with you now. So here we've got Charlie. So Charlie has just turned 60 and is keen to add to his super balance which is currently $175,000. He's earning $90,000 per year and wants to retire at 65. So it's got about five years to plan or use this TTR strategy. And importantly for Charlie, he's just not in a position to make additional contributions to super out of his take home pay. As much as he'd love his super to grow and make the most of it in the next 5 years, he just doesn't have that additional cash flow right now.

So let's have a little bit of a look at how a TTR can help Charlie to grow his superannuation, and we'll start looking at Charlie's situation without the TTR. So let's look at what his situation is looking like currently. So he's working. He's earning that salary of $90,000 per year, and based on the Super guarantee, his employer's currently putting $10,350 into his superannuation. That leaves him with a taxable income of $90,000 and an income tax of just under $20,000. After that income tax has come out, Charlie's got a net income of just over $70,000. So this is the amount that Charlie wants to maintain. He can't afford to reduce his net income any further. There is tax on the Super contributions that his employer is putting into superannuation, and the net increase to his super balance currently is shown there on the bottom of the table.

Now let's have a look at how Charlie's situation will change with a TTR strategy. His gross salary remains the same, so he hasn't reduced his working hours. He's still earning the same level of income, which means that his employer is still making the same level of super guarantee on his behalf into his nominated superannuation account. The difference here is Charlie is now going to begin salary sacrificing into super and we've worked out in order for Charlie to to maximise the $30,000 contribution limit, he needs to salary sacrifice $19,650 a year. And that would happen usually through his pay. Now if Charlie does that, that's obviously going to mean he's going to have a reduction in net income, which is what he didn't want. So in order to replace that salary sacrifice, we have worked out that Charlie needs to draw an income from a TTR of about $13,300 a year. That, together with his income, is going to top him back up to the income level he had before. The tax on his super contributions has increased because he is making additional contributions to his superannuation, but you can see that the net increase to his superannuation is now over $12,000. So that's an extra $3,341 going into Charlie's superannuation without anything actually changing for Charlie. So Charlie's still receiving the same level of income per pay. It's just now coming from a combination of his employment income and the income that he's drawing down from his TTR. And because Charlie is over the age of 60, the income is drawing down from his TTR account is tax free. So this strategy is working for Charlie in the background in those final years in preparation for his retirement between the ages of 65, helping to reduce his taxable income and actually grow his superannuation because that tax saving is sitting inside of his superannuation.

So if we have a little bit of a look at how this strategy has worked for Charlie in those five years in preparation for retirement, it's going to help to grow the superannuation from $175,000 at the age of 60 up to $275,000 over that five year. And nothing's really changed for Charlie during that, still receiving the same level of take home pay while this strategy is working for him in the background, which which equates to about $17,000 extra going into his superannuation and being invested on his behalf, plus about $3,300 in tax savings in that first year of using the TTR strategy.

Thanks, Michelle. So again, it's a matter of knowing what the rules are, what the different strategies to take advantage to keep you in the situation you want to be. Sam and Lucy had the ability to put more in. Charlie found that he could put more in, keep the same take home pay by using a transition to retirement strategy. So again, I'd stress that you find more information on the Australian Super website and talk to a financial planner. But a lot of people don't understand what they can do with their super once they retire. Most people know that superannuation is a bucket of money and it builds over their working life and then when they retire you take the money out as you need it and that's what most people do. However, there may be advantages for people to put their super into what's called an account based pension. It's still in superannuation world. All you're doing is moving it from a superannuation account to an account based pension and Australian super account based pension is called Choice Income and Choice Income gives you potentially some more flexibility around your super payments. It is still super money, but it's flexible where you can say I want to draw so much out per fortnight, year, month. You choose how often you get those payments, you choose how that money's invested. If you're over 60, as Michelle said before, what you're drawing out is tax free, but what's in there and growing is also tax free. So when my money's in super and building up a super fund pays up to 15% tax on the earnings. So if it earns a dollar, we pay up to $0.15 off to Canberra and 85 cents stays in your super account. With an account based pension like Choice Income, if it earns a dollar, that whole dollar stays in your super account, in your Choice Income account. So there are some advantages there. There is a minimum amount that I've got to take out each year and increases as I get older. I've still got the ability to take a lump sum out if I need it. So I might be drawing $1,000 a week a month, but I want $20,000 to to buy a boat or have a holiday. I can still take that $20,000 out. I'm over 60.

That $20,000 I take out is still tax free. So there's flexibility around a choice income account. And as Michelle said before, this is where sourcing income, OK, I might be eligible for the age pension, I might be eligible to draw down my super. How do I set it up that I'm consistently getting income into my bank account?

And that leads us to the government pension. As I said before, majority of Australians who are pension age receive the government age pension, The government age pension. There's a number of different rules, Michelle, around how old, we've discussed that at 67, but how much can I get? And what are the rules around how much the government's going to give me?

Certainly, Peter, let's talk a little bit about that. So we know that the age pension age in Australia currently is 67. And once you've reached 67 years age, you are eligible to apply for the government age pension. So that's step one. If you think you might be eligible or if you want to see what you're eligible for, Step one is actually going through the process of applying to Centrelink. And once you've applied to Centrelink, they'll apply some means testing, which we'll talk about in a moment. But the maximum fortnightly pension payment in Australia for a couple is shown there on the screen and we've got the amount there for a single person as well. So this is the full age pension.

So when we're talking about eligibility for the age pension, we know that they're looking at first of all our age, reaching age pension age, but then we're actually means tested by Centrelink. And once we do go through the process of applying to Centrelink for the government age pension, they apply two different tests, but they apply what's called an assets test and they apply an income test. Now whichever of these tests give us the lesser result is the one that is applied. So let's have firstly a look at how the asset test works. Let's have a look at what's assessable and what's not assessable when it comes to Centrelink and the age pension.

Now when it comes to assessable assets, they are looking at things like investments. So any property, shares, bonds, term deposits that you may have, they're also looking at super accounts. So whether the Super account is in accumulation phase in TTR or Choice income like Peter spoke about, this is assessable by Centrelink. Once you reach age, pension age, they are also looking at your household contents. Now, importantly with household contents, Centrelink isn't looking for your insured value or what you paid for your home contents. It's essentially a fire sale or garage sale value when they're looking at household content. So that's really important to keep in mind because often times people can overvalue their own assets or they might be wearing their rose coloured glasses when they're thinking about what their own contents might be worth. So it's important to keep that in mind with household content, any other possessions that you've got. So things like cars, boats, caravans are also included in accessible assets by Centrelink.

Then there's also gifting. Now we can gift as much money as we'd like to, but for the purpose of Centrelink or the assessment of eligibility for the age pension, there are rules when it comes to gifting. And what the rules say is that any $10,000 gifted in a given year will reduce your assessable assets by that amount, or $30,000 / 5 years. If you gift more than $10,000 a year or $30,000 / 5 years, then the amount above those limits is actually what's called a deprived asset, which mean that Centrelink will continue to count that as your asset for the next 5 years. So you can gift as much as you like, but it's important to bear in mind that if you're gifting over $10,000 in one year or $30,000 over five, then it may continue to be considered an asset by Centrelink for five years. So when it comes to planning for the age pension, it's important to keep these things in mind and plan well in advance.

Let's have a little bit of a look at what's exempt or not included by Centrelink and firstly, the family home. So the family home is exempt from the Centrelink incoming assets tests so long as it's under 2 hectares of land. Once over 2 hectares of land, it may be included as an accessible asset or partly included as an assessable asset. Super accounts if underage pension age aren't included. So let me break down what that means. So if you are a member of a couple and one member of the couple is age pension age and applying for the age pension, and the other member of the couple is not yet age pension age and still has their money in the accumulation phase of super, then their super account isn't actually counted until they reach age pension age or convert that account into a income or pension account. Funeral bonds and cemetery plots are also excluded under the income and assets test up to a certain limit, which you can find on the Services Australia or website.

Now, once Centrelink have added up all of your assessable assets and worked out how much you have in assessable assets, they're then going to look at a couple of measures. They're going to look at whether you are a single or a couple, a homeowner or non Homer homeowner, and they're going to apply your assets to these limitations. Now, if your assets are below the maximum pensionable amount, then you may be eligible for the full age pension. Once your assessable assets go above the maximum pension amount, your age pension amount will start to reduce up to the no pension limit or the upper threshold that you can see on the screen there. So it does start to taper off. And it's important to keep in mind that these limits do change regularly and are indexed over time. So if you're looking at these limits and thinking I might not be eligible, perhaps you might not be eligible right now. But it's important to keep in mind that these do change regularly over time.

Now that's the asset test. Now let's have a little bit of a look at the income test. So when we're looking at the income test, Centrelink is looking at how much income you are earning and they look at again, whether you are a single or a couple. Once your income is over the maximum pension threshold, your eligibility starts to reduce until the no pension or upper threshold, which you can see there on the screen. Now, the income text is a little bit more complex in that it's not actually looking at the income that your financial assets are earning. So it's looking at applying a deeming rate to all of your financial assets once they are added together. And these same deeming rates are applied to everyone depending again, whether you are a single or a couple. So Centrelink's not going to look at how much income your supers making, how much income your term deposits making, and then work that out for each individual. They instead Add all of your financial assets together and then apply the deeming rates that you see on the screen. So this can certainly help from an administrative perspective, I'm sure, but also help for fairness so that the same deeming rates are applied for all individuals rather than calculating what each individual has earned over a period of time.

There are also other concessions when it comes to the age pension. And I'm sure everyone knows someone that's applied for the age pension or wanted to apply to the age pension just to get their hands on a pensioner concession card, which can have great benefits, things like discounted rates and discounted health care. So we've got a number of different cards that there could be eligibility for. The pensioner concession card is the main one that people are aware of, which applies to those that are age on the age pension and age pension age. But there are other cards as well, things like the Commonwealth Seniors Healthcare card, which you do need to be age pension age for, but not necessarily receiving an age pension. And there's also the low income healthcare card as well. So this is where it can be really beneficial to visit servicesaustralia.gov.au website to have a look at some of the eligibility criteria for these cards or perhaps look to meet with a, a Financial Information Services Officer at Centrelink that can help unpack some of the options available to you when it comes to the age pension and other concessions.

Yeah, thanks, Michelle. And as I said before, Centrelink is such a vital part of this journey to retirement and especially as Michelle said, talking to a what's called a FISO, a financial information service officer at Centrelink, like Michelle and I, they can't give you advice, but they can tell you all the rules and the criteria about government support, whether it be concession cards or the age pension. And Michelle touched on a good point as well, is that the thresholds that that low threshold and high threshold, they move over time. So you may not have been people in the past, you may be eligible in the future. If you do need some further help, whether that be just using the calculators, coming to a webinar like this one or speaking to a financial planner. We have the resources to help you there and it starts with 1300 300 273 our phone number and from there they can triage you through the various sources of advice that you may wish to receive.

There's a lot more information available on our website at australiansuper.com/journey, a lot more information that we spoke about. We touched very lightly on many areas in this webinar. There's some more there that you can search at your leisure and you may be interested in looking at our Elements of Retirement guide. This is a guide we've set up recently where it looks at those steps moving into retirement, taking a bigger interest in your super and investments because they're going to be your income in retirement. What's my retirement going to look like? Am I going to be able to fund that retirement? Am I going to move into retirement cold Turkey or am I going to ease my way into retirement? And once I'm in retirement, what are my sources of income going to be? Have I done the research to make sure I'm maximising those sources of income? And finally, what's my lifestyle going to be in retirement and am I going to keep healthy? Am I still going to be active in retirement? All these things are addressed in our Elements of Retirement guide.

That brings us to the end of this webinar. So thanks Michelle for your time and your insights today, giving us a little bit more about this, this journey to retirement. Thanks Peter. It's been a pleasure. No worries. And thank you for watching this. And hopefully you'll walk away a little bit richer in knowledge and maybe in a more confident situation to plan your retirement.

Thank you.