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Welcome to Super Simple Chats. Rest's very own podcast. We will be speaking to industry experts about all things super. Trying to make it understandable and relatable for everyday Aussies. After all, it's one of the biggest assets you'll ever have.

We're recording this podcast on Gadigal land. We pay our respects to elders past and present.

Any advice you hear on this podcast is general in nature and doesn't take into account your financial situation, needs or objectives. Issued by Retail Employees Superannuation PTY LTD. Before deciding to join or stay, consider the relevant PDS and TMD at rest.com.au/pds.

Kerry

So it feels like there's a misconception around what retirement looks like for many people. Either people are thinking that they'll be traveling around either Australia or the world. Or on the other hand, that will be on the government age pension. The reality is it could be a combination of both. And there's anywhere in between that spectrum that members could land.

Kate

And it's complicated. It's, it's complicated to understand the different types of pension when you're preparing for what your income might be in retirement. So we're lucky today because we're going to unpack some of those income sources, and also understand the age pension and all of the ins and outs of it with our resident Rest expert, Pete. Welcome, Pete.

Pete

Thanks very much. Glad to be here. Hi.

Kate

Let's start with the basics. Can you help me understand? What is the age pension and what are the different types of pension?

Pete

Absolutely, absolutely. The government age pension is an income support payment, that is paid by the federal government to support, a basic living standard for all Australians as they get into their older years. There are eligibility requirements. So you have to be 67 years or older to qualify. And there are some residency rules as well, that you have to satisfy. So it's paid fortnightly into a bank account of your choice. And the amount differs based on whether you're a single or a couple. And the amount is also adjusted twice a year to account for inflation or that, you know, the cost of living increases.

Kate

Do I immediately get the full amount, or does it depend on other parts or aspects of my life and my circumstances?

Pete

And that's a really important question, you know, how much do I get out of that? It does fluctuate due to things like your income levels, your assets that you hold, or a change in your circumstances in those two areas. So it's good to be aware of that as well.

Kate

Is a house included in assets?

Pete

The family home is not included in that that test? No.

Kerry

So because we're here doing a superannuation podcast, there is the government age pension. But there's also, a pension account through Rest as well. So can you tell us a bit about that and the differences between those Pete?

Pete

Oh, yeah. Absolutely. So around, only around half of our members know that what an account or Rest account-based pension is, okay, which is quite a bit. It's a different type of super account, if you like, which allows members to receive an income stream so paid fortnightly or monthly or quarterly. However, it suits them best.

Generally, if you’ve retired, you can start a Rest account-based pension from 60 years onwards, and start to receive an income stream from that Rest account-based pension, whereas the government age pension will only cut in if you're eligible at 67. You can probably see that Rest account-based pension, is going to be probably one of the primary sources of income from 60 to 67.

Kerry

Yeah. Interesting. And so it would be fair to say that Rest’s pension account is what you use in retirement to draw down on, and, as opposed to a super account, which is where you're adding money into.

Pete

Yes, yeah. We've been we've all been adding to our super account for, you know, all of our careers, for most of our careers, some of us are a little bit older, probably for some of us younger, watching us today.

Kerry

We’re the younger ones.

Pete

Exactly right, by a long way as well. Isn't that right?

For most people watching, it will be all of their careers that they've been contributing to super, which they haven't been able to access. And this is the big difference is that's an accumulation fund while we're working. And then as we transition through retirement to our life after work, we could look at using another account, which will probably sit side by side with this super account. And that's a Rest account-based pension. Yeah. So the terminology is really important. There's a lot of jargon there. I'm really sorry for that. But that's that's what they're called. An income stream.

Kate

Yes, you can see why it gets complicated.

Pete

Absolutely. Yes.

Kate

This might be an obvious question, Pete, but when you say income, an income stream, do I think about that like a salary I’m being paid now? Like it sort of operates in the same way, it comes through on a fortnight or a month, that's the same principle, salary?

Pete

Yeah, that's a great question because it is the, no questions are silly questions. And that's really important for all of us to understand, you know, when we when we try to understand this whole super and pension thing, it's better to ask and know than not. But you're absolutely on the money. Yeah. It's just like a different type of salary.

Kerry

And we've actually done a session, haven't we.

Pete

We have we have yeah. Yeah. Exactly.

Kerry

So shameless plug there is some, link in the show notes, that you can see the previous sessions that we've done on that as well.

Kate

Kerry our residential promoter. (laughter)

Kerry

I do what I can do, Kate.

So it's sort of follows on from my question before, in relation to the income component, how do payments work, in the Rest superannuation pension account and the government age pension. How do they work together?

Pete

Okay. So generally people might start accessing a Rest account-based pension and get payments paid into their bank account of choice, from whenever they start that from age 60 onwards. Or they might start out at 62 or 64. It's, it's going to be different for everybody. And once they find out their, what they're eligible for under the government age pension, assuming it's more than a dollar, I'm sure it will be for many, many of our viewers, that that income could start coming through on a fortnightly basis.

So then you're going to have two sources of income. There's going to be a payment coming from your Rest account-based pension into a bank account of your choice, and there'll be income coming from a government age pension, maybe even even into the same bank account. So you might have two revenue streams from 67 onwards

Kate

Working side by side,

Pete

Working side by side.

Kerry

And it sounds like the government age, there's a really strict age limit when you can't access it before that, that age, but with your own Rest pension account, there's some flexibility on when you can access that. Is that fair to say?

Pete

Oh, there's there's still a, an eligibility for the Rest account based pension. Under the, under the preservation rules that are in effect now under the Superannuation Act, one is at 60 years of age onwards you can access your super under a Rest account based pension.

Okay. Lots of jargon once again sorry viewers. But yeah, we have to call them the accounts, what they're called. Yeah. So I guess, going going further on to that, that eligibility thing it's really good at in practice for everyone to sort of review their income and expenditure, every 6 to 12 months, because once you qualify for your age pension at 67, your circumstances may change.

You know, your income may increase or it may drop and your assets may increase or they may drop, which will change your eligibility for the government age pension. So you don't want to miss out on any income, any benefits from our, our friends in the federal government. So it's good to review those things every 6 to 12 months just to make sure that you are getting exactly the benefits you're entitled to.

Kerry

I find that really interesting because it's not like just as soon as you hit 67, you're, that's it, that's what you're on for, the rest of… you can keep assessing that, especially perhaps as your other assets decline or things like that.

Pete

In that sense, exactly right, Kerry.

Kerry

I learned something, I learned something new every day. Awesome.

Pete

And look, there's another point that you don't forget that once we all turn 65, you know, we've got that access to our super unencumbered. Best to speak to someone who can give you a little bit of sound advice, before you make any, any big decisions there. So 65 you might have some needs or wants that you want to finance and after 65 you can do that with lump sum withdrawals.

Kate

I think to your point earlier though, Kerry, is that it doesn't just stop at 67. That there's all this active planning, that and adjusting and reviewing that still needs to take place post that age as well.

So that that's really interesting. Yeah.

Pete

Yeah. Because we manage your finances all the way through, don’t we? And you’re quite right, we really… it doesn't stop at 67. You know there's no longer, okay, well that's all I'm going to get for the rest of my life. It's important to keep an eye on, your whole financial situation and keep discussing it with those people that can advise you, those trusted sources, whether that be family, friends, or maybe your, friendly Rest financial adviser.

Kerry

So Pete, are they tools or calculators or things like that that can help?

Pete

I am really glad you asked that question, Kerry. There just happens to be, some tools and calculators on rest.com.au our website at Rest. So if you look along the top of the, the website page, there's, tools and advice. And if you go in there, there is the calculators page. So there is a range of calculators: budget calculator, there's a retirement calculator which you can forecast what you balance might be at certain ages. So we really encourage everyone to just go in there and have a play, okay, have a play with them. And get to know how they work. If you really want to put some fuzzy numbers in there, you don't have to put the exact numbers in that reflect your current financial situation. If you're, if you’re some way concerned about that, pop them in there and just mess around with them. It's really a great way to get more information. It’s also going to bring some more questions into your mind as to maybe some other things that you want to know.

And guess what? We've got our Rest specialists and our Rest financial advisers that can help answer those questions for you. So we really encourage people, you know, have a start by playing with those calculators.

Kate

And can anyone explore those calculators, Pete?

Pete

Yeah, absolutely. They're not they're not limited to our fabulous Rest members. They're available to the general public. So yes jump on in.

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Kate (V/O)

We went out and asked everyday Australians what they knew about the government age pension.

Sinem

Do you think you'll go straight from working to not working and just retire completely all at once? Or do you think it'll be like a slow thing that you do?

Person 1

I don't know.

Person 2

I'm not really sure if I would get enough from retirement itself. So I think it's important there to have like, something behind.

Person 3

I definitely think I would probably go the, the lead up into it like do part time or do consultant work at that point.

Person 4

When my vision decided to do a bit of a downward turn, so I had to go on to, you know, sort of part like pension and part super, which wasn't what was in my plan. And then everyone assumes, oh well, that’s it, so how are you enjoying your retirement? And I'm going, well, I'm looking forward to going back to do a bit of work.

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Kerry

Just on the government age pension, though Pete. Applying for it. 67. Do we go, like when do we apply for this and how does that work? Because I think there's some other little nuances around that that we should all be aware of.

Pete

There absolutely are. So you can apply, anyone can apply for the government age pension 13 weeks before their 67th birthday. So ideally we'd all have a diary note on either and our phones or diaries, whatever it might be that rings a bell or… that pops off a siren.

Kerry

Pop it in your diaries, people.

Pete

That's it. Yeah, pop it in your diaries, don't forget, that 13 weeks out, that's when you start the application process. It's not going to happen overnight, but it will happen. So to use our fabulous, that fabulous quote

So really, really important start that process 13 weeks before your 67th birthday to make sure that you are fully set up and the payments can start, or the payments will start as soon as possible after your 67th birthday, because, you know, let's let's be honest, we don't want to miss out on a dollar of benefits that we're entitled to. So you don't want to leave it all 67 and three months or 67 and a half, or later to apply for the government age pension, because the payments won't be paid retrospectively. The… you know, understandably, the government's not going to go, oh look, we know we you didn't apply and for six months, we'll pay them to you anyway.

Kerry

It doesn't work like that, no.

Pete

That’s not quite how it works. And I understand why that's fair enough. So that's why we really encourage people to start that process 13 weeks before.

Kerry

So Pete, we've covered off what the government pension is, and spoken a bit about how that compares in contrast to the Rest account-based pension. And I just imagine people who are nearing the end of their working career or thinking about, you know, retiring, wanting to do that. They’re occupied with so many other things. Are they things that people commonly miss when they're at that stage and about to retire? And what are they?

Pete

There are two things, Kerry and that is, so, missing out on payments due to a late or incorrect application and then forgetting that your eligibility for the age… government age pension can change over time, and missing out, perhaps missing out on some entitlements as you progressed through retirement.

Kate

Pete, I find forms and that type of admin really difficult. Like I always miss things or always get the phone call to say it's incomplete. Can you help me understand how I could ensure that that goes as smooth as possible, so I don't miss any payments?

Pete

Okay, so, I'm sorry, I keep saying this. It that's where this 13 weeks is really important. Okay. So that's, you know, it's three months effectively for us to get that right.

And you're right. You know we we, we don't understand questions sometimes on on on paper forms.

Kerry

And Kate you've got 13 weeks to work out the questions.

Kate

Yes.

Pete

It's three months to get it right. Okay. And not all of us will get it right the first time. Most of us will probably get it wrong the first time we have a crack at it. And that's okay. We're only human. So applications can take time to get processed. So if you get the application wrong, for whatever reason, you'll have an ample time to reapply.

As I said before, really important to remember that the government doesn't back pay late communications. So get it all sorted out in those 13 weeks. And there are paid services that that can guide you through the whole application process. So really good idea to, you know, get… do your research and find out where you can get that support.

Kerry

Right. And I guess the other point you mentioned was around the eligibility. Your eligibility could change, as you're going through this, can you just touch on that a little bit more Pete?

Pete

Yep. So your eligibility for the government age pension can go up and it can go down okay. So that's really important as well. So keep in mind you can reapply throughout your retirement when your circumstances change. Okay. As you spend your retirement savings and things change, your assets change in value. The value of the amount of the government age pension can change through that period. So it's a bit of a dynamic thing. It's a bit of a live process, as you go through.

Kerry

There might be certain things that just change, what you've got in the bank.

Pete

Quite right. And there's going to be all sorts of things, that can, can affect that, your financial circumstances. So, you know, benefits coming in, lump sums coming in for whatever reason, if we're fortunate enough, and also changes to the amount coming in and the level of our savings going down. So, you know, these, these things, our finances throughout a working life, they, they ebb and flow, don't they? And they change so that they'll continue to do so and that will all contribute to our eligibility for certain amounts under the government age pension.

Kerry

That’s awesome. I hadn't really thought about those changes. So, yeah, that's really, really interesting. Thanks, Pete

Kate

Quite often, Pete, when our members call our wonderful advice team. Some of the concerns have been centered around the government age pension and, in the context of cost of living and all of those pressures we're facing into, there's a lot of fear around, would I really struggle if I was on the government age pension only? Can you shed any light on that?

Pete

Well, it depends on a lot of things. It's really hard to, to, to make a… one comment on that, but it depends on a lot of things. You know, it does the individual are in their own home or are they still paying it off or are they renting perhaps, you know, are they single are they a couple? And what's their lifestyle like? You know, we do. We have a, high lifestyle, perhaps a, a more medium or whatever lifestyle that might be. So it's really important to remember that the purpose of the government age pension is to be a financial safety net for older Australians in retirement.

So it supplements, it's designed to supplement their income in retirement. So in in collaboration I suppose with their super. So it's not designed to be the sole income. It may be for some. So that's really important that, everybody, as many people as possible at least speak to a financial adviser. And get some good advice for their own individual situation. It's never too late to ask for that help. And it's really something that everybody hopefully can access, especially our Rest members with our fantastic advice team.

Kerry

And we'll put the details of our specialists, in the show notes as well. So if you're wanting to know the first point of contact, or where you might start. Then you can go there as well.

One of the other things that our, our members, when they call us and we're talking to them often comes up is, is the government age pension always going to be there. Or you know, we have changing governments. There's changing policies. Like there's a bit of nervousness around will there always be a government pension? What's your thoughts on that?

Pete

We can't predict with 100% that the, the government age pension is going to be here forever. But it's really, really important for everyone to understand that the, the government age pension is one of the three pillars of the Australian retirement system.

Okay, there's the government age pension is one, the superannuation is the second, and is our savings and assets is the third. And the government is very much, understands how important the government age pension is as one of those three pillars providing financial support to Australians, to older Australians in their retirement.

Kerry

Super hasn't always been compulsory to be paid by employees, has it? So there's going to be people out there who have different levels of superannuation balances. And so there's probably going to be, you know, a need to for governments to look to see and make sure that, you know, members and Australians can, you know, live in retirement based on what they've got in their savings and the other pillars that you mentioned to support them.

So, but we are super lucky in this country to have, compulsory super. But it hasn't always been there, which means not everyone will have the super and may need to rely on a government pension.

Pete

Yep. Quite right. We are very fortunate to have this system. And, you know, there are times where there are concerns with an aging population that in the future we may not have the the revenue to fund, to adequately fund the government age pension.

But what the government does is every few years it commissions a report called the Intergenerational Report. Okay. And that seeks to do a forecast of the Australian economy 40 years in the future. All right.

Kerry

I's amazing to think that far out, isn't it.

Pete

I know, right? I mean the brains to do that like, just incredible. So the 2023 report shows, that there is increasing super about, increasing super balances in the Australian superannuation system. And that reduces the reliance on the age pension over time. So from that, there is no intent, to abolish this vital part of our system.

Kerry

Good. So I think… should still be there by the time I retire.

Pete

I think so, I think we could be, I think we can be comfortable in saying that, yes.

Kate

Yes. It's good to know that it's part of a three part system, or the three part pillars, That's really comforting to know that it's just not one approach and that we can leverage other parts of the system to make sure we've got the retirement outcomes that we’re after.

So, Pete, we've covered a lot, and I really feel like it's given some clarity around the difference in government age pension and the Rest account pension basics

Kerry

Agree, it's been great.

Kate

But if you could summarise for our listeners, what are the three takeaways from today that you'd like or suggest for them to look at.

Pete

Alright, I would love our viewers today to get a really solid view of their finances. Doesn't matter how far out you are from this period of transitioning from full time work into, into retirement, get that really crystal clear picture of your finances. So all your incomings and all your outgoings now, and then start thinking about what that's going to look like into the future. So that's one. The second one is set the date.

Kerry

Yes, so important.

Pete

So 13 weeks before your 67th. And that might sound silly for some people that it's, oh, it's so far away. I'm only 40.

Kerry

I'm going to say 40. (Pete 39 and a half?) Yep let’s go with that.

Pete

Is that right? Yeah. Okay. Yeah. But set that date because it is really one you don't want to miss. You want to make sure that you tick that little box.

Kerry

Well, especially if you don't get the back payment.

Pete

Don't you get paid back. Yeah. And that could be thousands. You know, if you, if you're entitled and ends up being, you know, $800 a fortnight or whatever that number is.

You know, if that lasts for three months, that's a lot of money that you haven't received. And I'm sure we'd all like that in our pockets. So, set that date 13 weeks before your 67th birthday.

And then the final one and the big one is please look to seek advice, you know, speak to our Rest specialists, speak to our Rest financial advisers, and get all the tips and tricks and the benefits of their wisdom and their training and, which they all, they all have to go through, but also to avoid the potholes as well. You know, we don't want to end up walking along our, our financial pathway in step in a pothole, a financial pothole, if you like, in twist our ankle, if you think about that in, you know, in a financial sense. They can be very very very helpful.

Kerry

Excellent.

Kate

It would also be worth, I think we covered off a lot of retirement planning and income sources and understanding and visualizing what your retirement is going to be in another one of our episodes. So we'll make sure that we put that below, because I do think that that will help with your first take out, is getting a real sense of your financial picture. That episode would be really valuable to get our viewers on the right track to do that. It's got some great actions inside of it.

Kerry

That will be in the show notes for everyone, as you said.

So, Pete, thanks so much for joining us today. I myself have learned heaps and I work in super and this conversation has been so valuable to me. So I hope it's been valuable, to everyone else as well. If you enjoyed today's episode, be sure to like, follow and subscribe! And for more information on the things we've spoken about, I said a number of times, but you will find them in the show notes and some links below.

And that is super simple.