Nick Bruining: Super fund smarting from market chaos? Crumbling shares could actually boost your age pension

Seniors in receipt of a means-tested Centrelink benefit could be in a position to boost their pensions on the back of the recent market turmoil.

Depending on your circumstances, the change could result in hundreds of extra dollars each fortnight.

The strategy requires you to remember how Centrelink updates account-based pension values and then adjusts your future pension payments under the means-test system.

Centrelink runs routine automatic updates, but that process means it can miss what’s actually been happening over the past few weeks.

Major ABP providers feed automatic updates to Centrelink twice a year. This usually occurs in February and August where the data provided includes the current balance, payment rates and any lump-sum payments paid to you in the previous six months.

The key is to recognise that recent market turmoil may not be reflected in the values that were used to calculate pension entitlements under the means-testing system. In many cases, these values were taken in February, before the market got whacked and about when the market was constantly testing all-time highs.

In the case of superannuation funds with a heavy exposure to US shares, the declines could be more than 10 per cent.

A fund with a $500,000 exposure to US shares has probably seen a fall in total value of more than $50,000 in the past three weeks.

An asset-tested part pensioner loses $3 a fortnight for every $1000 over the asset test threshold. A reduction of $50,000 could translate to an immediate increase of $150 a fortnight, or nearly $4000 a year in extra payments.

Significantly, when the calculations and adjustments were last done in August last year, the share market was about 5 per cent lower than the values at the end of February. That would mean many seniors would have received a letter saying their Centrelink pension was about to be reduced.

In addition to overseas markets, declining Aussie share funds have dropped about 8 per cent in the past three weeks.

And here’s the trick.

At any point in time, a Centrelink customer can update the values used to calculate their entitlements. There is a legal requirement to notify Centrelink of any change to your circumstances of $2000 or more within 14 days.

While most correctly assume that’s to ensure Centrelink doesn’t pay you more than you are entitled to, you don’t get back pay if you weren’t receiving as much as you were legally entitled to.

To update the valuation Centrelink uses, the simplest way is to do it yourself — either over the phone or via the my.Gov.au portal linked to Centrelink.

Visit your super fund’s website, log in and download a current “Centrelink schedule”. This report will have all the information required by Centrelink, including the current account balance.

If you’re doing it online, head to the income and assets tab where you’ll find an option to “manage income and assets”. From there, you’ll be able to see and change the current numbers being used by Centrelink.

In some cases, Centrelink may want to see a hard copy of the new schedule which you will be able to upload. The change will hopefully be processed within a couple of weeks and back-dated to when you submitted the changes.

If that doesn’t happen, book an online meeting with Centrelink for a call-back at a specified time. When someone rings, let them know what you’ve done as far as the update is concerned. Keep the Centrelink schedule handy in case they want other specific details.

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