Age Pension

[Guest fredhargreaves]

Hi All - I post this here although it's probably more applicable to thise thinking of staying, however either way it may be an issue in helping to decide. I never thought i would still be here as I have never liked it that much and maybe that's why this issue has crept up on me. Had I lived and worked in the UK I would now be looking at topping up my state pension (in a few years time) with my hard-earned savings. Here in the lucky country a few years ago the smirking treasurer P Costello simplified the age pension system.

 

It's really is very simple now. If you've got a decent amount of savings to invest you won't get a pension at all - it's as easy as that. The only way to "hide" your dosh from the assets test is to buy a massively expensive house, but then of course you'll have the ever increasing council rates to pay on it.

 

And all this after a lifetime of paying income tax at rates much highter than in the UK - I can remember at one time paying 48.5% (including Medicare levy) on the top slice of a fairly modest salary.

[cliffy]

I have two part pensions from UK, one Superannuation and one State. I worked to pay for both these.

It is also supplemented with a part pension from the Australian Govt. I have paid taxes here for many years. This is inspite of the savings and assets that I have. I did not think we were entitled to any at first, but was encouraged to apply and certainly the Aust Govt are very generous with their Asset testing.

I have no problems with the pension awards and side concessions, but I do pay tax, as all others who receive additional income do.

[Andrew from Vista Financial]

Even though the Age Pension is means tested it is as you say Cliffy still possible to receive something even if someone has a decent Super pot and the UK State Pension..

 

The Age Pension in Australia is actually means tested against assets and income and whichever results in the lower figure that is the amount actually received.

 

As an example a couple who may have $680,000 in their Super and receive the full UK state Pension of say $20,000 of combined income per annum may still receive $7,000 in Austalian Age Pension.

 

As they would be over age 60 the Super income would be tax free and they would only be assessed for tax on the UK Pension and Australian Age Pension, however with the offsets available it would probably mean that they pay no tax on this either.

 

 

Andy

[Guest fredhargreaves]

Surely we didn't all come to the "lucky country" to muddle by on $30,000 pa for a couple. If you have $1,000,000 in your pension pot (not a lot these days) you will get nothing - at somewhere under $900,000 the assets test will take the lot.

 

It's certainly true that some people can do quite well (relative to what they've paid) on a combination of UK pension and Aus top-up but if you want to work hard and push past the middling lifestyle into a tiny bit of hard-earned luxury you will find yourself in a massive poverty trap between pension plus and fully self-funded.

 

This all changed quite recently with surprisingly little protest. A whole generation of middle income earners suddenly had the right to top up their pension stolen from them. Only Brian Toohey in the Fin has consistently pushed the line that it would be cheaper to give everyone a full age pension than to give away all the tax breaks on super contributions, which benefit mainly the high earners - although the caps on these have just recently been lowered.

[Andrew from Vista Financial]

Hi Fred

 

In the example the couple would receive approx $60,000 per annum tax free, not $30,000, that's drawing just 5% per annum from the Super.

 

I hear what you are saying but think for the majority $60k net in retirement is very reasonable.

[Guest fredhargreaves]

The assets test is, at current rates of return on investment, harsher than the incomes test. People with certain income streams such as a UK pension or a salary related pension (such as ex-public servants - fancy that!) have the great advantage that no captial value is attributed to that income entitlement.

 

The common myth is (or has been) that even though income tax is relatively high in Australia it is effectively OK because there is no equivalent to NI (or European social security taxes). As we now see, it genuinely is a myth because, unlike almost every other country in the world (including e.g. New Zealand), there is no flat-rate age pension to which all (or all those who qualify through their lifetime contributions) are entitled as of right, so that they can top it up from their own savings/super.

 

UK residents coming to Aus late in life with a UK pension entitlement and modest savings might do quite well. In fact if you really want to work the system, come at the age of 54 and live here for 10 years without working at all - you will have the same entitlement as what I have after >30 years of paying tax.

 

My warning is really for the benefit of mainly younger people who are going to spend most of their working life here. If you want to plan for retirment you need to know that there is a massive poverty trap for middle income earners/savers.

 

Likewise, you may think it's a lot of fun living here now, but when the novelty wears off you can't go back to the UK and take your Australian pension with you the way the Brits do when they come here. it's a different basis altogether, and you won't qualify for a UK pension (or equivalent elsewhere) because you won't have made the necessary contributions.