Nick Bruining Q+A: Why your husband giving up work could leave you both better off

Question

I am a 73 year-old woman and, due to ill health, retired from work a couple of years ago.

My only income is about $5000 annually from the UK.

My husband is 76 and still working in order to pay our rent. It is a terrible situation we are in.

Am I able to receive any type of pension while my husband is still working?

Answer

While we don’t have any other information about your savings and assets, based on the information provided and — if your husband stopped or reduced his hours — you may be better off.

If he ceased work altogether and, assuming your combined assets are less than $739,500, you would be entitled to a full pension of $46,202 a year.

If your health leaves you needing care from your husband, he would possibly be entitled to the carer allowance, which is currently $159.30 a fortnight — or an additional $4141.80 a year. Added to this would be rent assistance of at least $5278 a year.

All up, including the UK pension, you would receive an income of at least $60,621 a year, most of it indexed, and you would not be paying any income tax.

Provided Centrelink-assessable income from all sources was less than about $114,084 this year, you would both be entitled to a part-pension, the full rent assistance and possibly, the carer allowance. This income figure includes the combined income test cut-off threshold of $102,284, the working credit bonus of $7800 and the instant working credit bonus of $4000 you receive when you are first granted an age pension.

The Centrelink assessable income includes your husband’s before-tax income, the UK pension and any deemed income from financial assets, which will include bank accounts, shares, managed investments and super.

You should make an appointment to see a Centrelink financial services officer, which is a free service than can help you make the right decision. A competent retirement financial planner who has access to the PRODA system — Centrelink’s online portal for professionals assisting you — is also an option.

Question

In the lead-up to retirement, I went to see a financial planner who charged me more than $5000 to draw up a financial plan.

On his advice, I rolled my $500,000 across from a low-cost, well-known fund into a fund he recommended. This fund has lots of investments which I have never heard of, and he says that he would adjust it regularly to reflect market conditions.

Currently, it seems to have about 90 per cent invested in shares.

He also suggested I should borrow money against my home and pump this into the super fund as well. I rejected that recommendation.

Now, eight months on, the fund has not performed anywhere near as well as the fund I left. I also asked about my age pension entitlements as I turn 67 early in the new year and he told me to make an appointment to see Centrelink.

I pay him one per cent of the super fund balance a year in fees and the new fund he suggested is also more expensive than the one I left.

Am I getting a good deal?

Answer

While I am only getting one side of the story, on the face of it your deal sucks!

The recommendation to change to the new fund should have been justified with clear and obvious benefits. While eight months is, in reality, too short a period of time to judge the returns, I am troubled by your exposure to shares at a time when many experts are warning that share markets are overvalued.

Good retirement financial planners are fully across Centrelink and should be able to provide precise details on your entitlements and assist you in claiming your benefit.

For $5000 a year, I would be expecting much more.

I suggest you raise these justifiable concerns with your adviser and, if unhappy, perhaps seek a new one using the moneysmart.gov.au website as a starting point.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association