Adding extra to pension accounts

In this blog when I refer to pension accounts – I am referring to traditional modern account-based pensions that are available today. Adding extra money to them can be a little more complicated than what meets the eye…

Generally, account-based pensions are setup when someone retires post the age of 60 and uses their accumulated superannuation to purchase one. An account-based pension is where you still choose to have your funds invested how you would like but instead of adding money in, you are drawing money out to live off on in retirement.

Retirees might like to add to them from time to time, such as sometimes in retirement people might find an odd job working a few hours a week. They would then come to me and asking if they can just tell their employer to contribute the super contributions from work to their pension fund. Unfortunately, once these pension accounts are setup, they are setup and although a bit clunky, you will need to open a new accumulation superannuation account to accept the contributions from your employer.

This is the same if you for example, sell an investment property and want to make a contribution to super, it needs to go into a new superannuation fund and can’t be added to the existing pension account.

Once you have your funds in superannuation, you still can’t “add” them to an existing pension account, but you can sometimes depending on your provider – combine them into a brand new account-based pension account. This strategy is sometimes called a pension “refresh”. There are a number of considerations to take into account and it is important to get advice before doing so as you are effectively setting up a new account which can have Centrelink implications, estate planning implications, investment and tax implications to name a few.

Who knows in the future if these accounts might become more flexible in regards to adding money in but as it stands with the current legislation, you can’t add new monies to an existing account-based pension account.