Working income support pension

 

Not ready to retire just yet…

Many of us don’t want to retire right away. Some of us want to keep working – maybe just not as much. Others may not have enough money to retire. Regardless, this is where a Working Income Support Pension (WISP) can be a great option.

Once you’ve reached Preservation Age, you can use a WISP to:

1. Work less, but keep the same amount of money coming in each week

If you’re looking to work less and live more, a WISP can give you the power to do this without reducing your income. By moving money from your super into a WISP account, you can use your pension payments to make up the pay cut that comes with working less hours.

2. Save more super and reduce your income tax – without cutting into your take-home pay

A WISP can make it easier for you to increase your super savings in the lead up to retirement. To do this, you move money from your super account into a WISP account. You then use your WISP account to pay you a certain amount each month. At the same time you get your employer to salary sacrifice a similar amount into your super account. So you have the same amount of cash coming in each month.

Plus, because you are salary sacrificing extra money into your super, you’re growing it faster. And, because this money is coming out of your before tax income, you may end up paying less tax.

3. Increase your income by accessing your super

What would you do if you had extra income? If you have a mortgage or other debts that you want to get paid off before you retire, a WISP could help you. It would pay you a second income, on top of what you already earn, which you can use to pay off your debts faster. 

 

How can a WISP work for you?

The best way to find out is to talk to one of our financial planners. They’ll help you look at the benefits, but also make sure it won’t work against you. Call us on 1800 757 607, or make an appointment now.

 

How it all works

Your WISP account is separate to your super account. When you open a WISP account you transfer some, or all, of your super into it. The money in it continues to be invested in the investment option of your choice, while it pays you a regular income.

While you’re still working, your super account still accepts your employer contributions, and if you are salary sacrificing or making additional contributions, they go into this super account too.

How old do you have to be to set-up a pension account?

To set up a Pension account, you need to have reached your Preservation Age, which is based upon when you born:

Date of birth Your Preservation Age
Before 1 July 1960 55 years
1 July 1960 to 30 June 1961 56 years
1 July 1961 to 30 June 1962 57 years
1 July 1962 to 30 June 1963 58 years
1 July 1963 to 30 June 1964 59 years
After 30 June 1964 60 years

 

How much money do I need to start a WISP?

To open a WISP account you need to start with at least $30,000.

How much can my WISP pay me?

The government has rules around how much and how little you can receive as income from your WISP each year:

  • The maximum you can take out is 10% of your total account balance in any one year.
  • And, the minimum amount you can take out is based on your age. It starts at 4% of your total balance if you’re under 65.

Will I pay tax on my investment earnings and payments?

If you are 60 or older, all of your pension payments are tax free. However, investment earnings are taxed at 15% similar to your super.

If you are under 60, your payments are taxed at your marginal tax rate, plus the Medicare levy. However, you may be able to get a tax rebate of up to 15%. Your investment earnings will also be taxed, but at just 15% (the same as your super investment earnings).

What investment options do I have?

Your pension account has the same investment options as your super account. You can invest your money in one option, or across a range of different options. And you can choose which investment option your payments are taken from.

How often are the payments?

You get to decide how often you want to be paid – monthly, quarterly, half yearly or yearly.

Are there any risks?

Your pension account works in much the same way as your super account, the key difference being that you receive an income from it. Like your super, and any investment for that matter, there are some risks:

  • The amount in your account may reduce if there are negative investment returns.
  • There is the potential that future government changes to super and tax laws could affect your pension.
 

Opening a pension account is simple and straight-forward.

Find out exactly what is involved and how to get started. Or call 1800 757 607 and we can talk you through the process, and arrange for a financial planner to help you.

 

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