- Have fun (finally…)
Let’s consider two things that a pensioner who qualifies for a part age pension under the asset can do with $10,000.
Option No.1 might be to put it in the bank earning 2.7 per cent interest. At the end of the year, you have your $10,000 plus $270.
Option No.2 might be to spend $10,000 on that European river cruise you have always dreamt of. Centrelink rules say that for every $1000 reduction in “assessable assets” your pension goes up by $3 a fortnight. The $10,000 holiday translates to an extra $30 a fortnight or $780 a year. That’s a nifty 7.8 per cent return on investment.
Sounds crazy, huh? Be responsible and leave the money in the bank and you get $270 in interest. Go nuts and spend two weeks making your Facebook friends jealous drinking champagne cruising through France and you get $780 extra a year. And that extra payment is for life and guaranteed by the Australian government.
It’s a pretty compelling reason to go down to Flight Centre!
- Start appreciating depreciation
The actual value of things may be less than you paid for them, or have them insured for. It is important to keep Centrelink up to date with current “scrap” values of what you own. The scrap value is the amount you would get if took the lot down to Cash Converters or put it on Gumtree.
You might have the contents of the house insured for $100,000 but Centrelink will often accept a value of about $10,000. The little Mazda you bought your partner for her 70th birthday might have cost $50,000 but you lost $8000 as soon as you drove it out of the showroom.
- Pre-pay your funeral
Confronting your own mortality isn’t pleasant but at least it could get you a pension boost! You can pay the entire amount to a funeral director or you can purchase a funeral bond from an investment company - up to $13,000.
The idea is that with both methods you can’t get your money back once it is done because you are pushing up daisies so the Government is happy to give you up to $39 a fortnight extra in pension if you spend the maximum preparing for the afterlife.
- Get generous
You can give up to $10,000 a year away to anyone you want and Centrelink will acknowledge a reduction in your asset value. The pension year is the same as the financial year so you could give $10,000 to your favourite niece on June 30 and another $10,000 to your favourite nephew on July 1 and reduce your assessable assets by $20,000 in 48 hours. That could boost your pension by more than $1500 a year.
The most you can give away and see your pension increase is $30,000 over a five-year period. You can, of course, give the lot away in that time (it’s your money and you can do anything you want with it) but Centrelink will only acknowledge $30,000.
Centrelink only looks back five years as well, so if you are thinking of retiring five years from now you can give away huge amounts to your kids to ensure you qualify for the pension. It’s also a good way of insuring against them putting you in a dodgy nursing home later on …
- Choose your investments wisely
There are certain investments which are also treated favourably by Centrelink. By far the most significant of these is superannuation for a person under age pension age. If you have a younger partner, money held in super in their name could get you a boost in your pension. Some other income paying investments, such as annuities, are regarded as being “Centrelink-friendly” because they can be treated differently by Centrelink and not counted the same way as money in a bank account.
* These are edited extracts from Don’t Panic: More reasons you don’t need $1 million to retire well by Nick Bruining, $29.95. Available in stores and online at thewest.com.au/dontpanic