Question 1

Why do industry funds refuse to combine a spouse death benefit into the one fund. This seems illogical when the surviving partner is a member of the same fund. This practice results in the fund charging twice for administrative fees. Can the person roll both balances into a new fund and restart their income stream?

This is not an individual super fund rule, it’s the law.

I know this can be frustrating and, on the surface, make no sense.

The idea behind the law is that superannuation should be used to provide retirement income – not just be used to build wealth to pass on to the next generation.

In a nutshell, when someone passes away, their super must either be paid out of the super system entirely, or if they have a partner, the partner can have the funds paid to them via a super pension.

Super death benefits can never be held within the accumulation phase of super and they can never be mixed/combined with other super benefits.

Question 2

Hi Craig,  I am a 57-year-old male with $535,000 in super and around $100,000 in savings. I own my home and my wife will turn 60 this year with around $250,000 in super.  I am planning to stop working when my wife reaches 60. My question is, as I won’t have access to my super yet, can I actually change my super balance from accumulation to transition to retirement account if I stop working before the age of 60? Any other advice that you could give me will very much appreciated.

Hello,

When your wife turns 60, she can access 10 per cent of her account balance each year under a transition to retirement pension, or, if she retires, she will have full access to her super.

She will also have full access to her super if she leaves her current role after turning 60 (regardless of whether she was going to retire or not).

For yourself, however, the same will apply.

You will need to wait until you reach age 60. Unless, you meet a strict permanent disablement definition, in which case you could access the funds sooner.

There is some confusion as the ‘preservation age’ (the earliest age you can access super), has been gradually increasing from age 55 to 60. From July 1, 2024 it is now 60 for everyone.

Question 3

As well as having some assets my wife and I, as government employees at one time, have whole-of-life government pensions. How is that pension assessed for the purposes of the assets and income test?

Generally, government defined benefit lifetime pensions are not assessed under the assets test for the age pension.

However, under the income test they are assessed.

The amount assessed is the full amount less a deduction of up to 10 per cent, depending on the ‘tax-free component’ within the fund.

For example, if you were receiving $1000 per week and your tax-free component is 15 per cent, then $900 would still be counted, because of the 10 per cent cap.

Note that defined benefit income streams paid by the following military superannuation funds are excluded from the 10 per cent cap:

• Defence Force Retirement & Death Benefits Scheme (DFRDB)
• Military Superannuation & Benefits Scheme (MilitarySuper)
• Defence Force Retirement Benefits Scheme (DFRB).

You should confirm the above with the administrator of the government super/pension fund.

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.