Retirement and Succession Planning

Case 1: Retirement and Centrelink

Case Facts: William (Bill) Unwin and his wife Christine have decided to take retirement as now Bill is 68 year old , he worked as electrician and originally from England but settled here for last 50 years and now has Australian Citizenship also, his wife Christine is born Australian and 62 Years old. Financial Information as provided by him is as follow:-

Home – debt free

AT North Rock – Joint Name

$1350000

Credit Card

 

$3400

Home content

IAG insured- Joint Name

$140000

Motor Vehicle

2016 Hyundai insured

$17000

NAB saving Account

Joint Name

$35000

Christine ‘ NAB (@1.25% int

Single name of Christine

$110000

Direct share portfolio

IAG 3500

TLS 5000

CBA 1000

WOW 1200

$10700

Superannuation Fund

Bill

$540000

Superannuation Fund

Christine

$260000

As nothing is mentioned, it can be assumed that they don’t have dependent children and seeing their assets and financial information it can be concluded that they have good set of investments in hand but as far as the liquidity is concerned there is an issue, they currently don’t have any source of immediate cash inflow other than Super Funds.

Current Centerlink Pension:

In general as per (Australian Government -Centrelink, 2020), following is current normal rate of pension

Normal rates

Per fortnight

Single

Couple each

Maximum basic rate

$860.60

$648.70

Maximum Pension Supplement

$69.60

$52.50

Energy Supplement

$14.10

$10.60

Total

$944.30

$711.80

Currently as per the age criteria eligibility, only bill is eligible for such pension as current age slab is

Your birthdate

Your Age Pension age

Date of Age Pension age change

1 January 1954 to 30 June 1955

66 years

1 July 2019

1 July 1955 to 31 December 1956

66 years and 6 months

1 July 2021

On or after 1 January 1957

67 years

1 July 2023

  1. Emergency funds requirement : As per the current financial position , the funds in the bank and stock holding cane be used as a emergency fund for the couple , as getting loan and that too without any regular income will be difficult another option will be to use credit card for short term emergency fund requirement.

Recommendation:

Getting a centrelink pension is good choice as there are many benefits which are available to both

Age Pension benefits

  • If you get the Age Pension, you may be eligible for other, related benefits:
  • Centrepay— a free direct bill paying service available as a regular deduction from your Centrelink payments.
  • Work Bonus— a payment that helps you earn more without reducing your pension.
  • Pensioner Concession Card

Government loans

If you're on or qualify for the Age Pension, you may be eligible for Services Australia loans:

  • Pension Loans Scheme—in this case real estate is used as security for a fortnightly loan for a top up amount upto retirement income.
  • Advance payment— get part of your pension payment in advance to help cover immediate expenses.

Bill and his wife can also combine their Superfund and create one to reduce the administrative expenses and also the time investment to manage it , they should sell their stocks and get the fund invested in the super to reduce the market risk of fluctuation and uncertainty. By doing this they will increase their option to get the more centerlink pension also , as the maximum pension eligibility is and Depends on income and assets tests, and whether it is single or in a couple.

The maximum Age Pension for:

  • singles is $860.60 a fortnight or $22,375 a year
  • couples is $1,297.40 a fortnight or $33,732 a year

These amounts do not include any supplements

Case 2: Retirement and Aged Care

Facts of the case study:

John and Gwenda Miller a married and old couple both in their 70’s , John have developed medical issues of Strokes and need regular care at home also. They have two kids who are adult and looking for right option to look after his father as their mother Gwenda is also old and it will be difficult for her to care him alone at home. And this has resulted that it has been suggested by ACAT team for Residential Age care, which also has a positive node from the John’s Doctor.

Financial Information about the John and Gwenda

Assets

Detail ( if any)

Value in $

Residential Home (Own)

Couple is joint owner

$1.4 Million

Home Content Value

Insurance with IAG- joint names

$80000

Motor Vehicle-

2015 Toyota

$30000

NAB Pensioner’s A/c

Joint Name

$75000

Term Deposit

Gwenda’s Name

$120000

Funeral Bond

With each’s name

$8500

Funds Required

   

Refundable Deposit (RAD)

 

$500000

Income:

Pension of $711.80 /fortnight Or $1423.60 per month

State Super Pension $1250.00 per month

Total income per month $2643.60

1. John and Gwenda’s assets and income sources will be assessed for aged care fee purposes

After analyzing the assets and other financial information as provided it seems that other than the medical issues of John the couple is financially sound and are capable of managing their retirement life or age care fee. They have their property which can be used either by selling and going into rent of shifting to age care and putting funds into a pension fund to get a regular income , House itself can give them the required income the good part is that their children are adult and are not dependable on parents which gives them the freedom to use their assets for their own use. As per (Department of Social Services, 2014) If you are entering an aged care home on or after 1 July 2014 you will need to complete the Residential aged care combined assets and income assessment form and submit it to Centrelink or the Department of Veterans’ Affairs (DVA) if you receive an income support payment through them for assessment. You will need to complete and submit this form even if you are also receiving an income support payment. This is because the information required for aged care is different to the information required for income support payment purposes. If you don’t have your income and assets assessed you may be charged the maximum rate of fees and charges. The Residential aged care combined assets and income assessment form is available from Centrelink or My Aged Care website.

Age Care Residential facility

Australia’s aged care system aims to ensure that all older people receive support and quality care when they need it.Though it is highly emotional decision not only for person who is going there but also for all family and friends, because of the concerns about the uncertainty. Residential aged care can be offered as permanent and short-term care. Short-term care in an aged care home is called residential respite care. The person for which the care is required may be accessed residential respite care for up to 63 days for every financial year. It time can be extended in durations of 21 days if ACAT assessment finds that this extra time is essential.

  1. Aged care fees would be payable if John were to enter residential aged care on a respite basis for 3 weeks before returning home

As per (https://www.agedcareguide.com.au/information/respite-care, n.d.)The highest daily fee for a facility as respite resident is set by Government at 85% of the single basic Age Pension. Which is currently $860.60 per fortnight and 85 % of it is comes to $731.50 per fortnight or $52.25 per day. Because it will be temporary Stay, couple don't have to pay an accommodation charge or bond. Actually it also depends on the assessment of the Assessment team, What type of care is required and fees is charged accordingly.

As per (Department of Social Services, 2014) gives the details about various services provided by the aged care and its fees and charges. According to it Australian Government pays the bulk charges to it but the expenses

pay one or more of the following in residential care.

  • A basic daily fee. This covers living costs such as meals, power and laundry. For some people this is the only fee they are required to pay.
  • A means-tested care fee. It is an additional amount of contribution towards the cost for care given that few people may be required to pay. The Department of Human Services will work out if you are required to pay this fee based on an assessment of their income and assets, and will advise them about that amount.
  • An accommodation payment. It will be for the accommodation in the home. For few people govt also provides subsidy to met in full or part by the Australian Government, while others will need to pay the accommodation price agreed with the aged care home. The Department of Human Services ((Centerlink, n.d.)) will advise them which applies to their based on an assessment of their income and assets.
  • Fees for extra or additional optional services. Additional fees may apply if John’s family chooses a higher standard of accommodation or additional services. These vary from home to home.

25% of the as booking fee for the proposed period of respite care

  1. If John and his family decides to reside on a permanent basis to stay in the aged care then as per the rule of the the Aged care home the fees would be in the form of RAD which will be $500000 as stated in his case payable if John were to enter residential aged care on a permanent basis(Australian Government , 2020), it is these rates which are applicable from 1 July 2020 to 30 June 2021

Home Care Subsidy Rates

Home Care Package Level

Daily Subsidy Rate

Level 1

$24.46

Level 2

$43.03

Level 3

$93.63

Level 4

$141.94

And as per one of information cited in (Your life Choice , n.d.), the fee paid for permanent residency will be as below:

Means-tested care fee

The lower of:

· cost of care (up to $245.62 per day)

· An amount calculated based on combined income and assets

· The capped amount of $26,381 per year or $63,313 over lifetime (both indexed)

4 Impact of John’s admission to residential aged care would have on their ongoing Centrelink pension entitlements

Centerlink will also pass this information and it will be used to calculate the fee as per Means Tested care fee for John’s permanent residency in the aged care home, and the amount will be adjusted towards his expenses there.

References for 

Australian Government. 2020. Schedule-of-subsidies-and-supplements-for-aged-care. [Online]
Available at: https://www.health.gov.au/resources/publications/schedule-of-subsidies-and-supplements-for-aged-care
[Accessed on: 03 October, 2020].

Australian Government -Centrelink. 2020. Centrelink/age-pension/how-much-you-can-get. [Online]
Available at: https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension/how-much-you-can-get [Accessed on: 03 October, 2020]

Centerlink. n.d. https://www.servicesaustralia.gov.au/individuals/centrelink. [Online]
Available at: https://www.servicesaustralia.gov.au/individuals/centrelink

Department of Social Services. 2014. 5_steps_booklet. [Online]
Available at: https://www.dss.gov.au/sites/default/files/documents/07_2014/5_steps_booklet.pdf
[Accessed on: 03 OCtober, 2020].

Age Care Guide. n.d. [Online]
Available at: https://www.agedcareguide.com.au/information/respite-care
[Accessed 04 October, 2020].

Your life Choice. n.d. Cost of age care. [Online]
Available at: https://www.yourlifechoices.com.au/aged-care/cost-of-aged-care#:~:text=Respite%20care%20may%20provide%20short,(to%2019%20September%202017).
[Accessed on: 04 October, 2020].

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