As the global market downturn depresses share prices and shrinks pension coffers, many retirees are thinking about topping up their regular pension payments with earnings from part-time work, or even supplementing it with a part-age pension. But the conundrum many face is: Can I officially retire, draw down a pension and then return to work? Aren’t I supposed to be retired for good? Others are concerned that their current super benefits will disqualify them from accessing a part-age pension.
Many retirees in this situation will remember signing a retirement declaration stating that they do not intend to return to either full-time or part-time work, and in doing so they were able to access their super benefits.
Remember the rules state that you can only access your super until you reach your preservation age and retire for good, or satisfy another condition of release such as a terminal illness. Your preservation age hinges on when you were born and can be age 55, 56, 57, 58, 59 or age 60.
The rules state that someone age 60 to 64 has to officially retire in order to access their super; just turning age 60 is not enough to trigger a condition of release of preserved super benefits. This, however, changes when the person hits age 65. This group has unlimited access to their super regardless of whether they are working or not.
The good news is that signing a retirement declaration doesn’t mean that you are banned from working again. Your personal and financial situation can change; for example, how were you to foresee a global financial crisis that would wipe out two consecutive years of returns – an unprecedented event? And even though the past year has repaired much of the damage, most retiree accounts are still well below the pre-GFC levels achieved in late October 2007.
Provided that you were sincere in your intention to retire in the past, there’s no problem with changing your mind and taking up work again. But as with every major decision, check first with your financial adviser, especially if you worked in the public sector as they can have unique rules that may be at odds with the norm.
If you’re currently paid from an account-based pension such as an allocated pension, do you have to close it? The answer is no – the allocated pension can still be paid even if the retiree decides to work rather than retire permanently. The pension account consists of unrestricted non-preserved benefits, which can be accessed according to the rules of the fund.
Self managed super fund investors can look into taking out a transition-to-retirement pension (TRIP). TRIPs force you to withdraw a minimum amount each year, but no more than 10 per cent of your pension account each year (if you’re under age 65 and you’re not planning to retire, TRIP is the only pension that you can take out).
And for those who are age 65 and over, you can work and access your super benefits without any hassle at all.
The other alternative for retirees facing significantly diminished super balances is accessing the full or part-age pension. In order to do this you must have reached age 65 (for males) and age 64 (for females) – and you also have to qualify according to your assets (excluding the family home) and your income. If either your income or assets are too high then you will receive no age pension. The Age Pension for individuals is set at least 25 per cent of the male total average weekly earnings.
But is your super counted towards either the income or assets test? In most instances yes, but it varies depending upon your age and whether you are already drawing on your super as a pension or income stream.
If you are under age pension phase and are already receiving pension payments from your super fund, your super benefits do count towards assessing your eligibility for receiving the Age Pension.
If you are age pension age or over and are already taking an income stream from your super fund, then it’s also assessable. If you own an allocated pension or an account-based pension, then the entire balance counts towards the assets test. If, however, you hold a term allocated pension or complying pension, then you may not have to count any of your pension assets as part of the asset test, or a proportion of the assets.
And finally, if you are age pension age but have not started an income stream, your super account is counted as an asset for the assets test. It is also counted as income for the income test based on the deeming rules; essentially what happens is a set rate of return is deemed to have been produced on the account and that’s the amount of income that is counted in the income test.
The only time that super assets are not counted towards either the assets or income test when a person is under age pension age and is not drawing on their super benefits.
This article is of a general nature only and does not take into account your individual circumstances. For advice, TheBull recommends that you employ the services of a qualified financial adviser.