Ask the Expert: Flexi pension part of name game, living overseas and combining super funds

Account-based pensions are also known as an allocation pension or a superannuation income stream.

Account-based pensions are also known as an allocation pension or a superannuation income stream. Photo:TND

Question 1

What is a flexi pension? Should I do this before I turn 67?

What is in a name?

Most people convert some or all of their superannuation accumulation funds to what is known as an account-based pension.

This is sometimes also referred to as an allocated pension, or a superannuation income stream.

Now the product providers themselves put a label their products to differentiate their product from others, even though most of them are very similar.

For example:

  • UniSuper calls its pension product ‘Flexi Pension’
  • AustralianSuper calls its ‘Choice Income’
  • Australian Retirement Pension labels its ‘Retirement Income Account – Account Based Pension’
  • And Hostplus simply calls it ‘Retirement Account’.

By moving your funds from accumulation to a pension account you can then have regular tax-free income paid to you from your super.

Not only that but all internal earnings within a pension account are tax free.

Therefore, these accounts are even more tax effective than regular superannuation accumulation accounts, which tax earnings at 15 per cent.

That is why there is a limit on how much you can transfer into a pension account, currently $1.9 million.

From an age pension perspective, once you turn age pension age it makes no difference whether you keep funds in super, transfer them to an account- based pension, or put the funds in a bank account.

When you are in a pension account, you can still access all of your money at any time.

However, you do have to draw down a minimum each year. This is a percentage of your account at the start of the financial year, based on your age, as shown in the below table.

Question 2

I am planning to retire in the Philippines because of the lower cost of living. My wife and I were both born in Australia. Will our leaving Australia permanently make us ineligible for an Australian old age pension?

 To qualify for the age pension (you can drop the ‘old’), residency requirements must be met.

You must be in Australia at the time of applying for a payment, and an Australian resident for 10 years or more.

Some exemptions may apply. This includes claiming under an international agreement.

Australia has international social security agreements with 31 countries (but does not include the Philippines).

If you then leave Australia for long periods (or permanently) you can still be paid the age pension, however, the following applies:

  • Your pension supplement will be reduced to the minimum and you will lose the energy supplement
  • You will be paid monthly rather than fortnightly
  • If you have less than 35 years of age pension residency (from age 16 until you reached age pension age) you will be paid a lower rate based on a proportional formula.

Further information on payments rates when moving overseas can be found here.

Question 3

Can I combine super funds? Currently we have two in a certain fund, one in my name and one in my wife’s, and another in my name only. I am wanting to combine all three into the one in my name only. We are both in our 80s.

You can certainly combine super funds that are in your name into one.

There are a few ways to go about this.

Firstly, if you have a MyGov login and have the ATO linked, then it’s simply a matter of a couple of clicks.

Alternatively, your preferred super fund, the one where you want to combine all the funds into, will be able to assist. They will have an online or paper form, or if you simply call them up, they will help to arrange this.

However, you cannot combine your wife’s super into yours. The way the superannuation system is set up, each individual has their own fund, and they can’t be ‘rolled’ over into another name.

If you were under 75 funds could be withdrawn and then recontributed back into another person’s name, within certain caps.

But as you are now in your eighties it is not possible to recontribute the funds to super.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

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