We posted Part 1 of this topic on 25th October, which looked at the complexities and frustration of the application process.
The question has been asked regarding when should a person look at whether they would qualify for an age pension?
For many people, applying for the age pension is not something they think about until they are close to the qualifying age.
I believe that rather than waiting 13 weeks before you reach the necessary age, you should be looking at your situation five years before your qualifying age.
The qualifying age, depends on your date of birth and can vary between 65 and 67. As an example, a person born on 20 August 1956, would qualify at the age of 66 and a half. Those born after 1 January 1957, will need to wait until they turn 67.
So, for all those people who turn 62 after 1 January 2019, next year is the year you should review your circumstances and determine whether you may qualify for an age pension.
Why five years you may ask? For those people who see the age pension as a very important component of their retirement income, five years is an extremely important period.
As an example, consider the following situation;
The husband is turning 62 and his wife is 60. They own their own home, a couple of cars, have $85,000 in bank accounts and term deposits. Due to of a lifetime of work, they currently have a total of $650,000 in superannuation. Over the next five years through the strategy of salary sacrifice and investment growth, their super is expected to grow to around $800,000.
Their assets assessed for age pension purposes in five years could be close to $900,000, including their cars household contents and cash. Based on today’s upper asset threshold for a home-owner couple, which is $848,000, they would not qualify for an age pension. However, given the annual adjustment in the age pension and the thresholds at the age of 67 he may qualify for a small pension.
Of course, this all sounds very reasonable and based on their financial assets they should be able to achieve the comfortable lifestyle that they hope for when he retires at the age of 67.
The missing factors in this scenario are their children!
Their children are adults, they are married, have children of their own, but are struggling financially.
The couple have promised that when they retire, they will help them out by gifting them $100,000 each, three children a total of $300,000.
The downside to this plan is that in five years when they gift $300,000 to their children, and the husband applies for his age pension, Centrelink will maintain a gift of $290,000 for five years as an asset and deem income on this $290,000 when assessing his entitlement to an age pension.
This process will also affect her age pension entitlement when she applies two years later, on turning 67.
As this couple had not reviewed their situation in respect of their plans to gift money to their children, or the age pension legislation, they will find themselves in a less than comfortable position as their age pension entitlement is significantly less than what they had factored into their budget.
It is extremely difficult to ask for the money back once you have gifted the funds to children.
Believe it or not this situation occurs on a regular basis. The number of people who gift money to their children, for very good reasons, and then expect their age pension to increase to compensate for the funds that they have gifted, is a lot more common than we think.
Now, I am not saying that what this couple intends to do is wrong. What I am saying is that they need to review their position and make some decisions now.
If they do not have the funds to gift to their children at this moment and they still plan on giving $300,000 to the children in five years when they retire, they are at least aware of the consequences and are able to make plans.
Always remember to talk to someone and for the purposes of any age pension entitlement, do not leave it until just before reaching age pension age. If you do plan on gifting money to your children, make sure you do so five years before you turn age pension age, because, the deprivation rules don’t apply to the money or things you have given away more than five years previously.
Source: Mark Teale | Centrepoint Alliance
Is it time to apply for the aged pension? Pt. 2
/in Financial Advice General Info /by Shellie FisherWe posted Part 1 of this topic on 25th October, which looked at the complexities and frustration of the application process.
The question has been asked regarding when should a person look at whether they would qualify for an age pension?
For many people, applying for the age pension is not something they think about until they are close to the qualifying age.
I believe that rather than waiting 13 weeks before you reach the necessary age, you should be looking at your situation five years before your qualifying age.
The qualifying age, depends on your date of birth and can vary between 65 and 67. As an example, a person born on 20 August 1956, would qualify at the age of 66 and a half. Those born after 1 January 1957, will need to wait until they turn 67.
So, for all those people who turn 62 after 1 January 2019, next year is the year you should review your circumstances and determine whether you may qualify for an age pension.
Why five years you may ask? For those people who see the age pension as a very important component of their retirement income, five years is an extremely important period.
As an example, consider the following situation;
The husband is turning 62 and his wife is 60. They own their own home, a couple of cars, have $85,000 in bank accounts and term deposits. Due to of a lifetime of work, they currently have a total of $650,000 in superannuation. Over the next five years through the strategy of salary sacrifice and investment growth, their super is expected to grow to around $800,000.
Their assets assessed for age pension purposes in five years could be close to $900,000, including their cars household contents and cash. Based on today’s upper asset threshold for a home-owner couple, which is $848,000, they would not qualify for an age pension. However, given the annual adjustment in the age pension and the thresholds at the age of 67 he may qualify for a small pension.
Of course, this all sounds very reasonable and based on their financial assets they should be able to achieve the comfortable lifestyle that they hope for when he retires at the age of 67.
The missing factors in this scenario are their children!
Their children are adults, they are married, have children of their own, but are struggling financially.
The couple have promised that when they retire, they will help them out by gifting them $100,000 each, three children a total of $300,000.
The downside to this plan is that in five years when they gift $300,000 to their children, and the husband applies for his age pension, Centrelink will maintain a gift of $290,000 for five years as an asset and deem income on this $290,000 when assessing his entitlement to an age pension.
This process will also affect her age pension entitlement when she applies two years later, on turning 67.
As this couple had not reviewed their situation in respect of their plans to gift money to their children, or the age pension legislation, they will find themselves in a less than comfortable position as their age pension entitlement is significantly less than what they had factored into their budget.
It is extremely difficult to ask for the money back once you have gifted the funds to children.
Believe it or not this situation occurs on a regular basis. The number of people who gift money to their children, for very good reasons, and then expect their age pension to increase to compensate for the funds that they have gifted, is a lot more common than we think.
Now, I am not saying that what this couple intends to do is wrong. What I am saying is that they need to review their position and make some decisions now.
If they do not have the funds to gift to their children at this moment and they still plan on giving $300,000 to the children in five years when they retire, they are at least aware of the consequences and are able to make plans.
Always remember to talk to someone and for the purposes of any age pension entitlement, do not leave it until just before reaching age pension age. If you do plan on gifting money to your children, make sure you do so five years before you turn age pension age, because, the deprivation rules don’t apply to the money or things you have given away more than five years previously.
Source: Mark Teale | Centrepoint Alliance
Change for good or change for the sake of change?
/in Financial Advice General Info /by Shellie FisherWith the significant swing against the Coalition at the October by-election in the Sydney seat of Wentworth, we turn our attention to next year’s Federal Election, expected to be held in May 2019.
If present trends are an indication of the future, we will see a change of government with the Australian Labor Party (ALP) taking the reins of power in Canberra.
So, what will a change of government mean for our super?
Hardly a month goes by without someone proposing that we change some aspect of the superannuation system. It is no wonder that the average super fund member is so disengaged with their super.
In July 2017, we saw the most significant changes to superannuation in the previous 10 years. Some changes were good, and others not so good, depending on your perspective.
Some of the initiatives the ALP has previously expressed opposition to may provide hints to changes that might be made. These include:
On the positive side, the ALP recently announced plans to give women a better chance to achieve equality in superannuation by requiring superannuation guarantee contributions (currently 9.5% of salary) to continue to be paid while on government paid maternity leave. This would also be extended to men, who take paid paternity leave following the birth of a child.
Currently, employers are not required to make superannuation guarantee contributions for employees earning less than $450 per month. However, the ALP proposes to remove the minimum income threshold before superannuation guarantee contributions become payable. Unfortunately, this may lead to very small amounts being contributed to super only to be swallowed up in fees and charges by super funds and otherwise being lost to the members.
The Opposition has also made some other significant tax-related announcements, including the controversial plan to eliminate the cash refunds of excess franking credits and making changes to negative gearing for existing properties. By all accounts, negative gearing will still be available for newly-built residential properties, but not for established properties.
Without a doubt, as the next election approaches, we are going to see much posturing by political parties of all persuasions, as they jockey for control over Australia’s $2.7 trillion superannuation nest-egg.
Source: Peter Kelly | Centrepoint Alliance
The Invisible Money Generation
/in Financial Advice General Info /by Shellie FisherToday’s kids have a different concept of money to previous generations. Instead of using coins and bank notes, this generation has grown up watching people buy things by tapping and swiping or clicking buttons online. They live in a world where in-app purchases, electronic bank transfers and digital currencies like bitcoin are as common as piggy banks were back in the day.
It’s no wonder that research from the Financial Planning Association (FPA) revealed two in three Australian parents say it’s difficult for their children to grasp the actual value of money.
DIGITAL NATIVES
Generations Z (born 1995 to 2009) and Alpha (born after 2010) are the invisible money generation – citizens of an increasingly digital world with the Internet at their fingertips. They are savvy with technology because they’ve been using it all their lives, and having ready access to all the information they want has made them more curious in matters of money and life than any previous generation.
These digital natives don’t just learn about money from their parents. They gather their information from a wide variety of sources, including grandparents (63%), teachers or coaches (59%), peers (26%) and social media (18%).
MORE CONFIDENT, BUT WORSE OFF
The FPA research showed parents recognise that their children are more engaged with money than they were at their age. Compared to their own childhoods, 69% of parents say their children are more confident asking questions about money and 57% feel their kids are more financially literate.
Yet, 62% of parents believe their children’s generation will be financially worse off than they were. Uncertain economic conditions and the growing cost of living play a part in this belief, but for many this fear goes beyond external influences. More than two in five parents are concerned that their kids won’t have the financial skills they will need as adults to become financially successful.
FINANCIAL STRESS AND UNCERTAINTY
It’s possible that financial stress and limited financial literacy are affecting people’s confidence when it comes to talking about money. Almost two in three young parents (aged 18-29) say they are very or somewhat stressed, while that number is closer to one in three for those aged 60 or over. People living in regional or remote areas are more likely to be financially stressed than their city-dwelling counterparts, and single parents report a much higher level of stress (67%) than those who live in two-parent households (47%).
Parents who are financially stressed are less likely to talk about money to their kids compared to those who don’t feel stressed – with 32% admitting they’re reluctant to have these conversations because they don’t want their kids to worry about money. But the FPA report revealed that children who participate in conversations about money are more curious, confident and financially literate than those who don’t – even if the conversations aren’t always positive.
WANT TO KNOW MORE?
Seeking advice from a financial adviser can build your financial literacy and confidence. If you would like to know more speak to your financial adviser.
Source: Colonial First State
Is it time to apply for the Age Pension?
/in Financial Advice General Info /by Shellie FisherOn 1 February 2019, many people will turn 65 years and 6 months. Why is this important? For those people who turn 65 years and 6 months, it means they have reached age pension age.
Just over 70% of these people will be eligible for either a full age pension or a part age pension. The first step in the process is applying for the age pension – sounds simple doesn’t it?
A person’s age pension entitlement is based on, not only their age, but also on their personal situation, their income and assets.
Regardless of what we may think, the government is not aware of many aspects of your financial position. This means you need to complete an Application for Age Pension which consists of 25 pages and asks a total of 94 questions. In addition to this form, you also need to complete an ‘Income and Assets form (Form SA 369)’, which consists of 18 pages and 60 questions.
Depending on the answers you give to the questions asked on the Income and Assets form, you may have additional forms which you need to complete.
Sounds like a very long and exhausting process. The good news is that you do not have to wait until you turn 65 years and 6 months to apply for the age pension. You can lodge your claim 13 weeks before you turn the qualifying age, which means for those people who turn 65 years and 6 months on the 1 February 2019, you can lodge your application on the 2 November 2018.
Once you have completed the required forms, you can lodge the application in several ways:
To assist you in this entire process there is another form Ci006 ‘Information you need to know about your claim for Age Pension’, I also suggest a visit to the Department of Human Services website is a must – https://www.humanservices.gov.au/individuals/services/centrelink/age-pension
If this all appears a little daunting, talking to an expert and paying them for their assistance could be the best option.
Source: Mark Teale | Centrepoint Alliance
Royal Commission – do we need another?
/in Financial Advice General Info /by Fil-BattistiI have been in Vietnam for the last few weeks, and when I left the country the “Royal Commission into Misconduct in the Banking, Superannuation and Financial Services” was in its last days of public hearings. On my return home I have been greeted with the Royal Commissions’ interim report.
From my perspective, the more interesting news story was the Prime Ministers announcement of a “Royal Commission into Aged Care Quality and Safety”. At present, we do not know the exact terms of reference as these will be developed after public consultations, which will include residents and their families.
Based on the Prime Ministers announcement, we broadly expect the Royal Commission into Aged Care will look at:
• The quality of care provided to older Australians, and the extent of substandard care
• The challenge of providing care to Australians with disabilities living in residential aged care, particularly younger people with disabilities
• The challenge of supporting the increasing number of Australians suffering dementia and addressing their care needs as they age
• The future challenges and opportunities for delivering aged care services in the context of changing demographics, including in remote, rural and
regional Australia
• Any other matters that the Royal Commission considers necessary
We do not know at this stage who will preside over the Royal Commission however this job would normally be assigned to a judge.
What is the difference between a Royal Commission and a normal court of law?
There are several very important differences;
1. Royal Commissions are established by the Governor General on advice from the Government, whereas courts are standing institutions
2. Royal Commissions are not bound by the rules of evidence that the courts are. These rules encompass the legal principles that govern the proof of facts in a legal proceeding
3. For witnesses there is no difference – they may be examined and cross-examined by legal counsel
4. Royal Commissions can make recommendations but cannot determine a person’s guilt or negligence. Whereas a court does not make recommendations but will make a final determination of guilt and impose a penalty
5. Witnesses may be compelled to answer questions in a Royal Commission and a court, but can only claim privilege against self-incrimination in a court
These are not the full detailed outline of the legal differences between the two, that would take far too much time and certainly too much paper.
The important principle to remember is that the Royal Commission will look at a wide range of issues, depending on the terms of reference. The community, residents, their families and providers will all get a chance to present a submission outlining their concerns and vision of the future for the aged care industry.
If a person does have a concern or an issue with an aged care facility or provider right now, you should be talking to the Aged Care Complaints Commissioner who provides a free service for anyone to raise their concerns about the quality of care and service. They can be contacted on 1800 550 552.
Source: Mark Teale | Centrepoint Alliance