cash out super at 66 for max age pension?, page-28

Some more detail;

Example of a pensioner with $100k in Super and $15k PA from a company defined benefit pension or overseas pension (you know those old fashioned things that few people get any more, but a lot of older folks may still have some that are grandfathered).

I wanted to put this in the mix to take into account personnel income tax liabilities.

If the $100k is in super, then in the first year there will be %5k min draw down. Your income is now $20K of which $15K is taxable (?). Due to the personal allowances there will be zero tax to pay. Your age pension will be $27,754 (reduced from the full pension due to income from non super) If an old fashioned DBP is not counted as income then you will get the full pension. If we assume for the purposes of this that the Super is held in cash at 3% at the end of 20 years your super balance will be $52,887, due to increasing draw down rates kicking in.

Your total income is $47,754.


Should you cash out your super and put the $ in the bank earning the same 3% and take the interest as income, then you would have the following outcome in the first year;
$18,000 personal income (again no tax to pay), plus an age pension of $28,754.

Your total income is $46,754.

You are $1,000 worse off. But you have no SMSF fees, nor any paperwork to do every year, so it is a wash.

However at the end of 20 years you still have capital of $100,000, a positive outcome by $48,000.

There may be other pros and cons, but I wanted to highlight that anyone with less than $100k in a SMSF should seriously consider their options at Pension Age.

It would be interesting to hear if anyone in this situation has had experience of Center Link advising them to consider cashing out their SMSF?

Even amounts up to $200k should merit a working of the numbers at the appropriate time.