Q: I have had a Self- Managed Super Fund (SMSF) since 1995.
As at 1 July 2005 the assets were assigned to an Allocated Pension in the name of both my Wife and myself. In the Allocated Pension our individual purchase price was $171,806 and deductible amount was $9042 each. At the same time we both received a Centrelink part pension.
My wife died on 1 March 2011.
Centrelink have acknowledged the whole yearly balance of the Allocated Pension now rests in my name but does not allow for the whole deductible amount of my late wife’s interest to similarly rest as a benefit to me, only my proportion of $9,042.
What do you see as the remedy to satisfy any requirement of Centrelink to allow the whole deductible amount to be credited in my name? I am currently 74 years old.
A: Regardless of whether you have an SMSF or you are a member of a Public Offer Fund, your superannuation member benefits and accounts should always be held and reported separately.
Essentially it sounds like you and your wife would have had an Allocated Pension each. As a result, your Centrelink non-assessable amounts would have been different based on your respective life expectancy factors at the time of commencement (which differ between men and women) – unless you were Reversionary Pensioners on each other’s pensions.
The Centrelink non-assessable amount is the portion of income paid from the Allocated Pension that is not counted for Income test purposes by Centrelink. It is calculated as the purchase price of the Allocated Pension at commencement, divided by the relevant number (Life Expectancy factors) of the Super fund member at commencement.
Where someone is specified as a Reversionary Pensioner, the longest of the two people’s life expectancy factors is applied at commencement of the pension.
The benefits of a non-assessable portion are generally only available to Allocated Pensions commenced by pensioners prior to 1 January 2015. As your wife died in 2011, and it appears that you have essentially received her pension since this time, this treatment should have been grandfathered and continued to you.
The size of the non-assessable portion that you should be benefiting from will depend on the way the pension was originally structured.
If you were nominated as a Reversionary Pensioner, the deductible amount should not have changed as the longer of your 2 life expectancies (at commencement) would have already been factored in.
On the other hand, if you were nominated as a Beneficiary, then you would have had the option to take the benefit as a lump sum or receive the benefit as a Death Benefit Allocated Pension.
In this instance, upon commencement of the new Allocated Pension, the non-assessable amount would have been reset, based on your relevant number at the time you commenced this income stream. And, assuming this occurred before 1 January 2015, then you should have received a new non-assessable amount which would have been different to that applicable to your wife.
The applicable deductible amount would be the commencement value of the Death Benefit Allocated Pension divided by your relevant number at the time the new pension commenced. So, for example, if we assume this was done in 2011 when you were 70, your relevant number at this time was 14.76.
If the Death Benefit Allocated Pension did not commence until after 1 January 2015 then there will not be a non-assessable portion for Centrelink purposes.
So in your case, it might be useful to confirm whether you received your wife’s benefits as a Reversionary Pensioner to the original Allocated Pension or if you were a Nominated Beneficiary.
It would also be useful to confirm the commencement date of the Death Benefit Allocated Pension and confirm that Centrelink are aware of this date and whether a non-assessable portion is applicable.