It’s not uncommon for pensioners to be asset rich, but cash poor. This often happens when your major asset is your house.
So what are some strategies you can use to improve your income?
Rates & utility concessions
Concession card holders are eligible for discounts on rates and utilities in most states. In the ACT, the savings can easily be up to $2,000 a year, adding $75 to your fortnightly cashflow.
So make sure you’re registered for all your concessions!
Deferring your rates
Rates can put a big dent in cashflow for many homeowners. In the ACT, did you know that a pensioner can apply to defer their rates?
Interest is charged on the deferral, but it’s at a pretty low rate of around 5 and a half percent, and it is paid back when you later sell the property. It can be a good way to improve your cashflow without having to sell your house.
Pension Loans Scheme
I’m always surprised that this great scheme doesn’t get more attention.
It’s for people who are receiving only a partial age pension. Like the deferring of rates, you are building up a debt against the property which is paid back later, but it is also at a fairly competitive rate when compared to alternatives like a reverse mortgage.
The way the scheme works, is you can have your age pension topped up from your actual entitlement, to the full pension rate. The extra amount is a loan secured against your property that is repaid when you leave.
So say the full age pension for a couple is $1,200 a fortnight, but your other assets mean you only receive a payment of $1,000 a fortnight. You can ask to have the extra $200 a fortnight paid to you and then repay that later when you sell.
The Pharmaceutical Benefits Scheme provides subsidised medicines to pension and other concession card holders. Part of this is what’s called the SafetyNet, which means once you reach a certain limit for the year you don’t have to pay any more.
The limit will depend on which concession cards you have. Your pharmacist is the best person to speak to about this, they can get you set up on the scheme if you’re not already.
If you’re ready to move somewhere different, or to a smaller home, downsizing can definitely free up some extra funds to provide you a regular income.
Before you put your place on the market, talk to a financial planner to see what your options are. Many states now have stamp duty concessions for people who downsize in retirement and that could save you thousands.
When we have mortgages, and children and families who depend on our income to meet living expenses, insurances such as life insurance are very important.
We do often see retirees though who still have life insurance policies that they’re paying for, once all the debt has been repaid and they’re already living off their super and the pension. This can mean you don’t need the insurance anymore, and can cancel your cover to save the premiums.
We always recommend seeing your doctor for a quick check-up before you do cancel though, just in case!