Should you be receiving the age pension?

My father looked upon the age pension as a sophisticated savings account. He felt he had worked hard all his life and paid more than his fair share of taxes - taxes that the Federal Government effectively kept aside for his old age.

That once he reached pension age, he was adamant that no matter what he had to do to achieve it, he would qualify for the age pension. He was simply accessing some of those taxes he had paid over the years.

Sometimes I think that attitude is a generational thing. A lot of people I speak with see qualifying for the age pension, even a partial pension as a sign of failure, that they haven't set aside enough money for their retirement.

I have some sympathy for both views. I do though believe that Australia has a well-structured superannuation system supported by a reasonable aged pension system that helps support those who need support.

I also think that as couple if you own your own home and some $950,000 plus in superannuation savings, that all things being equal, you shouldn't try to access the age pension. That’s just my view.

There is one grey area which I think it is up to individual discretion. This is where, as a couple, one partner is substantially older than the other, so for example one partner is age 60 and the other age 66.

They decide to retire at the same time and have a combined superannuation balance of say more than $900,000, so they clearly should not on paper, qualify for the aged pension.

They have two options when they retire. On retirement, they can accept that they shouldn't qualify for the aged pension and so start an account-based pension, based on the money they have in super.

At this point, the assets inside super supporting their account-based pension, both in terms of income and capital gains is tax free while the pension in the hands of its recipients is also tax free.

The other option is they can structure their affairs to qualify for a pensioner when the older partner qualifies for the aged pension in a years’ time. They can do this by ensuring the bulk of their superannuation savings are in the name of the younger partner and still in accumulation mode.

This will mean that Centrelink will not include the value of assets held within superannuation which is still in accumulation mode. So, this means the older partner may, depending on their overall financial position, qualify for the age pension.

If you are welded to idea of qualifying for the age pension no matter what, you might consider this strategy. However, you would need to weigh up the benefit of obtaining a part pension against losing the income from a large chunk of your super savings, losing the tax advantages of putting that super into pension paying mode and the hassles of dealing with Centrelink.

I still think that if you are fortunate enough to have sufficient assets not to qualify for the age pension then you should just be happy that is the case and not try to manipulate loopholes to obtain the age pension for a few fleeting years.