Gift of super to a partner can help boost age pension

I am aged 66, retired and have $400,000 in an accumulation fund with VicSuper. My wife is 61 and has $200,000 in accumulation mode at the same super fund. She has a part-time business and is earning about $25,000 a year. Our assets are well below the age pension limit. How can we maximise the pension when I reach 67 this year? L.H.

When you turn 67 and apply for a part-pension, Centrelink’s means tests will count both your assets and income – except for your wife’s super, which will be ignored for six years until she reaches age 67 – and grant half of a couple’s pension.

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Assuming you have $10,000 in cash, plus a car worth $20,000 and personal effects that would raise $5000 if sold in a garage sale, the asset means test would count $435,000 and allow you, for now, half of about $1400 a fortnight i.e. $700 a fortnight to you ($18,200 a year).

The income test would deem $410,000 to earn $286 a fortnight and this, plus your wife’s salary, allows for $1025 a fortnight – i.e. $513 a fortnight to you ($13,325 a year).

Since the income test produces the lower result, this is what you would receive.

When your wife turns 67 and retires, the asset test (ignoring future indexation and any other changes) would allow, in round figures, a pension of $800 a fortnight ($20,800 a year) while the income test would allow $1420 a fortnight ($36,920 a year). So, in this case, the assets test would be the determinant.

In reality, these figures would have changed by then but, in this example, the longer your wife works, the more income is received by the family.

Assuming she works to 67, you could maximise your half of a couple’s pension by withdrawing super to reduce the assets subject to deeming.

You could do this by withdrawing and gifting, say, $330,000 to your wife to place in her super fund (assuming she has not placed any other after-tax contributions in 2021-22). Preferably, do this before June 30 to give yourself maximum flexibility in case of future contributions, then no more after-tax contributions for her until July 2024. This could increase your half pension to about $580, but you would have to be very nice to your wife.

The optimum method of reducing assets that I favour is to spend money to ensure your house is in top condition, since you will probably live in it for decades before possibly needing to sell it and move into an aged-care facility.

I have been in a de facto relationship for more than 20 years, and we have decided to part company. When I moved in with my partner, she already owned her house, mortgage free, and had about $700,000 in superannuation. I am about to retire, own no real estate, and have $50,000 in super and about $100,000 in goods and chattels. I intend to apply for an age pension. When I moved in with my friend, as she already had the house and super, I agreed that I would not make any future claim on them. Now she is concerned that as we have been together for so long, the government may compel her to provide accommodation or financial assistance to me. I am happy not to accept financial help but is she likely to be forced to? G. C.

No, there is no law that would force her to divest some of her assets – unless you go to court, make a claim and seek a settlement under the state’s Family Law Act.

I am not a lawyer but I understand that, if you were to do so, there is no specific formula that determines how assets are to be divided in a property settlement.

The court considers “marital property” i.e. property acquired during the relationship, and “separate property”, which includes assets that one partner bought themselves entirely, in their name, using their funds, or brought into the relationship. Both types are considered by the court in arriving at a financial settlement.

I know it’s not romantic, but if one partner in a new relationship has significant assets, and the other one doesn’t, it is worthwhile arranging a prenuptial binding financial agreement – but even they are not considered totally reliable.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.

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