A lot of attention has lately been generated about Superannuation Fund changes, fees etc.
I wonder when attention will be directed to the fact that people with sometimes substantial amounts of money in allocated pension funds are not able to change their funds to a better performing Super/Pension Fund without affecting their Centrelink asset calculations and thus loosing some of their entitlements.
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Sorry, itâs me again. Since there was only limited interest in this topic it may be prudent to state that it affects a lot of pensioners who took up an Allocated Pension with their Superfund at retirement. A few years ago the retiree could switch their funds from one fund manager to another if he/she felt so inclined for whatever reason. However, the laws changed and it was made easier to change your Super Portfolio between Superfunds but not your Allocated Pension. As mentioned earlier the retiree now looses part of their Centrelink pension as the Allocated Pension amount after the changeover is classed differently by Centrelink.
Maybe someone in the know can explain it better?
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I presume your issue is that described in
at the section
Will I get the Age Pension if I also have an account-based pension?
If you started your account-based pension before 1 January 2015, and were already receiving a Centrelink pension or allowance, then only part of your pension income will be assessed under the income test. If you commenced your pension on or after 1 January 2015 then the whole balance will be deemed for income test purposes.
My understanding, and I am neither expert nor well educated in the hoops, traps, tricks and loopholes, nor am I giving advice, is that when a pension is transferred it is essentially stopped, put into accumulation phase, transferred, and put back into pension phase with the then current date, causing what you report.
That could be the litmus test where addressing an issue helping mostly people with comparatively substantial amounts of money would not play well to the electorate and the numbers of people affected could be comparatively small meaning they donât see new votes in the issue and donât expect to lose (m)any either.
Just an opinion, but the Super laws seem as much targeted to provide ongoing work for financial planners as to provide retirement funds for us because of the hoops, traps,and tricks. If it was about us, it would be straight forward and rules would not change, and if the rules did change existing accounts would be grandfathered to be able to continue with the original rules or if beneficial move to the new.
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As @PhilT has advised, part or all of the income payments from Account Based Pensions which commenced prior to 01.01.2015 were not treated as income for existing Centrelink pensions, but the funds in the Account Based Pension were included in the assets for calculating Centrelink pensions.
From 01.01.2015, all Account Based Pension payments are treated as income for calculating Centrelink pensions.
The exemption for Account Based Pensions requires that the funds remain with the same Account Based Pension provider. Transferring the funds to another provider will void the exemption, and they will be treated the same as Account Based Pensions which commenced after 01.01.2015.
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If you have a financial advisor, it may be best to consult them for advice as each individualâs circumstances can be different and one should seek advice which reflects their own financial position.
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Thanks @phb, apart from charging a fee a financial advisor can only confirm that I would be worse off if I would switch my allocated pension to another provider (thanks @Fred123 and @PhilT for the rough fundamentals). Fact is that this matter has not been discussed in the Superannuation reviews, remember that Superannuation money forms the basis of allocated pensions. Although switching Super has been made easier, switching allocated pension $$ to another provider has been made worse for retirees. There may well be some political points in play as @PhilT mentioned.
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I have become dissatisfied with the returns from my account-based pension, particularly when I see the advertised returns shown for other providersâ account-based pensions on âcomparisonâ web sites.
So I thought I would investigate the pros & cons of changing my provider. I knew that changing a superannuation provider was relatively simple and wrongly assumed that changing my account-based pension provider would also be relatively simple.
It is not simple and it seems to me next to impossible to discover what the outcome would be if I made the change to an alternative provider. Apparently to change the provider, one has first to commutate oneâs existing account-based pension and then reinvest the proceeds (whatever that might be) into the fund of the chosen alternative. I could not find any guidance on this topic on the internet although I did find some veiled warnings about complexity and suggestions about using a financial adviser. Remembering the Royal Commissionâs hearings of a few years back, I have no wish to consult a so-called âfinancial adviserâ.
What information or advice can any readers offer?
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Many superannuation funds have advisors which can be used to seek advice - especially assisting with the change in fund which you plan to do. I would be contacting your existing fund or the one you plan to move to, to see if such services exist. Preferably the one being moved to as the existing fund may try and persuade you to change your decision.
Just in relation to financial advisors and the Royal Commission. A majority of financial advisors represent the interests of their clients. Not all financial advisors are similar to those identified in the Royal Commission or presented in the media when something goes wrong. The challenge is to find a good independent financial advisor. It is possibly easier post Royal Commission, but still one has to find one they can work with and trust. This is where the challenges lie.
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As @PhilT quoted earlier in this thread:
Will I get the Age Pension if I also have an account-based pension?
If you started your account-based pension before 1 January 2015, and were already receiving a Centrelink pension or allowance, then only part of your pension income will be assessed under the income test. If you commenced your pension on or after 1 January 2015 then the whole balance will be deemed for income test purposes.
As far as I know these rules did not change and I am still waiting for the Government to do something to bring the ABP switches in line with Super switches.
Thank you dieterfb for your reply. It seems to me that as the population ages the poorly performing providers of account-based pensions do not need to worry about their poor performance unless and until the government acts.
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The previous government, [supposedly] better managers of everything by their humble assertions*, responsible for it may have designed this âholeâ to keep the underperforming funds in business? It remains to be seen if this or a future one rights it in favour of the aged who are essentially trapped as of now.
* every few days there is another report suggesting the last 10 years has been mostly management by neglect if one believes them. Other reports suggest that has been interspersed with âstrategic investmentsâ coloured blue, less often with reddish tinge.
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As with any comparison it is important to know whether or not you are comparing like with like. With super, this means that you should only be comparing the return from your current fund to returns from other funds with a similar spread of risk across the various asset classes.
For example, if you have chosen low capital risk investments e.g. bonds and cash investments in your current fund, there is no point comparing the return to that of a fund that holds mainly higher risk investments e.g. shares and property.
If you decide to change funds, you will have to firstly take your invest from your pension account to an accumulation account. This page states that this is a legal requirement. You can then invest in a pension product with another fund. This process shouldnât take too long and should not involve a high amount of costs. The staff at you new intended new fund should be able to answer any questions you may have.
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As far as I can see (and I may be wrong!) the link âThis page 1â in Glenn61âs message applies to SMFs not to retail funds.
It may also be relevant to consider the stability of the underlying capital assets (investments) of your chosen fund. Those with higher returns in higher risk investments may now find not only the returns falling but the value of the funds also at risk of significant loss. Likely already happening.
Advisors and superfunds most often recommend low risk defensive strategies for those in retirement, subject to personal circumstances. For some retirees a low risk fund with significant investments in bonds etc is important. For others the rewards of greater risk can be worthwhile, or akin to betting your retirement home on the 100 to 1 chance in the Melbourne Cup.
Personal circumstances vary. Itâs why others have consistently suggested the need to seek assistance from a qualified financial planner. Itâs remiss as @PhilT acknowledged that changing funds once a pension is in place is not as straight forward as when in accumulation phase.
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Yes, that may be true but as previously stated for pension accounts established after 1.1.2015 you may loose a substantial amount in Government age pension due to changed deeming provisions.
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The circumstances and deeming rules changed for more than just allocated pension account holders on this date. Whether it was fair or not the Govt chose to grandfather the assessments of existing allocated pension accounts on the old rules. There were other classes of welfare recipients who were not offered the same.
Itâs a complex discussion that appears to offer differing view points on equity or fairness. The following offers one relatively recent and hopefully well informed assessment of how it has evolved.
It suggests different outcomes depending on personal circumstances for those looking to now make changes.
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As I posted here and there if they wanted to serve us rather than a vested interest the US has much to learn from, although there remains unnecessary options to privilege businesses who sponsor the equivalent of IRAs, eg 401(k) and others. There are a few rules, none germane to this discussion.
V1 - deposit pre tax dollars in an IRA and withdraw them in retirement as taxable income at that time.
V2 - deposit post tax dollars in a Roth IRA and withdraw them as tax free income post retirement.
It gets a bit âmessyâ because of annual limits for the flavours and the options of early withdrawals incurring tax penalties and so on, but the basics are really easy, and the tax man only gets involved at the end (V1) or the beginning (V2) and the growth in between is tax free.
Super being convoluted and taxed as it is, with all of the technicalities for managing, moving, and taking it seem to seriously question the motivation(s) behind it. It could be simple, or comparatively simple, but is not made simple, only more convoluted as the pollies play their games.
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