Like other financial assets, your account based pension is taken into account to determine your entitlement to social security benefits.

Assets Test

Your account based pension account balance is included as an asset for the purpose of the assets test. The balance is revalued every six months, unless you only receive your pension annually in which case your account balance is also revalued annually.

Income Test

Your annual pension, less a 'special' deductible amount, is counted as income. This deductible amount differs from that used for tax purposes. In this case it is the full purchase price divided by a life expectancy factor.

The life expectancy factor is your life expectancy (in years) when you started the Account based pension unless you've elected the reversionary pension option, in which case it's the longer of your and the reversionary pensioner's life expectancies.

An example

In this example, Kate Jones rolled over $250,000 into an account based pension and drew a payment of $18,000 in the first year. There is no reversionary pension, so Kate's social security treatment is as follows:

Assets Test

Assessable Assets = $250,000

Income Test

Note that the above calculation is an example only and you should seek professional advice for specific details.

Reproduced with the kind permission of Macquarie Investment Management Limited

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