Should I use the money in my offset account to pay down my mortgage?

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We have a housing loan of $366,000 but also have $232,000 in an offset account. Monthly payments are $2151. Is it better to use the money in the offset account to reduce the housing loan because that should reduce the term substantially?

Provided the offset accounts are notionally paying you the same rate as you are being charged on your housing loan I see no advantage in using it to pay the loan down. I would prefer to see the money build up in the offset account until you reach a situation where the money in the offset account equals the money in the loan account. This gives you flexibility in case you wish to retain your home as an investment property in the future and buy another home.

You could then withdraw the entire balance of the offset account as a deposit on your new home, leaving the interest on the debt to be offset against the rental payments.

Keeping your money in your offset account leaves you with more options down the track.

We have long been fans of the ING debit card which you have often written about. However, we recently got a long email from them about changes in the conditions and can’t work out whether we’ll continue to get commissions refunded when we make overseas transactions. Furthermore, will five ATM transactions still be free month of any ATM in Australia provided we have five qualifying transactions on the account?

I agree that their communication was very long in detail, but that is the compliance regime these days. The good news is that anybody travelling overseas who uses the ING debit card will still get a refund of any hidden commissions charged. On a recent trip, this was worth over $400 to me.

Five ATM withdrawals a month in Australia will remain commission free provided the other criteria are complied with. I find this especially useful given the speed at which the banks are closing their ATMs as it effectively makes every ATM in Australia available to you without fees.

I am a single aged pensioner – I want to sell my home and move into a rental retirement village paying $380 per week. I will have $475,000 in my bank account. What is the maximum amount I can have in my bank account? I do not want to lose my pension and so will not sell if it means I will lose it.

Aged Care Guru Rachel Lane says the amount of age pension you can get is calculated on an income and an assets test. In the scenario you give you would be classified as a single non-homeowner, the asset test threshold that would apply is $504,500 so with $475,000 (and assuming your other personal assets don’t exceed $30,000) you would be entitled to the full age pension under the assets test.

Under the income test, $475,000 in the bank would be deemed to earn $368 per fortnight. The income threshold is $190 a fortnight. Under the income test your pension would be reduced by $89 a fortnight to about $975 a fortnight. You could seek advice about structuring your assets and income in a more pension-friendly way.

If you downsize into a rental village one of the other benefits is that you can be eligible for up to $157 a fortnight in rental assistance on top of your age pension.

My wife and I are each retired, over 60 years of age but under 75, and each has a superannuation fund in pension mode. Our problem is that 70 per cent of our balances are taxable. Can we reduce the taxable component by creating new accumulation pension funds and transferring some of our pension fund balances into the accumulation funds? Then we would want to convert the accumulation funds back into our existing funds. We have a total of just over $1 million currently. Would this strategy convert some of our taxable components to tax-free? Neither of us work any longer, but I may go back to work casually.

This is called a re-contribution strategy and is commonly used. Just be aware that you cannot nominate which components may be withdrawn – they will be in proportion of your taxable and non-taxable components. However, the entire new contribution would form part of the non-taxable component and increase it at the expense of the taxable component.

Anybody considering this strategy should be aware that you cannot make non-concessional contributions to a superannuation fund with a balance exceeding $1.7 million – this would not apply in your case.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Email: [email protected]

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