Retirement Ready

It's been more than thirty years, but this familiar voice won't be gracing Perth's airwaves much longer.

Because luckily for Graham, his financial advisor was on the ball and saved him thousands of dollars.

Financial expert Nick Bruining says the changes are part of the Federal Government's "Deeming System" which's used to calculate income for pensions. "What Centrelink do is they take all of our bank accounts, our shares our managed funds, even gold bullion and throw it all into one big pot, they apply a notional rate of interest to that big pot and that amount works out to be an amount per fortnight which they can then use to adjust your pension down. The more you've got in deeming, the lower your pension." it means pension funds will be included in the new "deeming system", whereas right now, they're not counted.

And here's the catch. "The sting is, if those interest rates go up, and the deeming rates go up, it could cost retirees thousands."

So our average Aussies, Joan and John turn 65 in October. They'll retire with $270,000 in Super which they'll convert into an Account Based Pension.

If John decides to retire in November this year they'll receive an annual income of $46,500.

But if he retires in January NEXT year, they'll get less than $46,000 a year.

A difference of $556 based on the current interest rates.

But if interest rates simply return to where they were last year, that amount will go up nearly four times as much to nearly $2000 a year.

And with a return to more normal interest rates, the difference over John's life expectance will be worth more than $35,000.

Well, the Department of Social Services says the changes are:

"The Australian Government extended the normal deeming rules to superannuation account-based income streams for the purposes of the social security income test to ensure all financial investments are assessed fairly and under the same rules."

And they:"....were announced in last year's Budget to give people time to plan for the introduction of the new deeming rules in January 2015."

Nick Bruining says "for many people it will be a case of bringing forward retirement if perhaps you're going to pull the pin this time next year, you might want to start thinking about it now, or in the next few months." As for Graham, well, you've got four weeks to find out what he's got planned before he switches off air, for the last time. You need to weigh up how it's going to impact your retirement income in totality."

To view the story click here