Nick Bruining Q+A: No guarantee of age pension after losing money in bad investment. Here’s what to do

Question My father-in-law invested his life savings of $1.1 million in a private investment group some time ago. The “investment” has now stopped paying an income stream, though the manager says the return is still accruing “on paper”. Given that the investment appears to have failed, would my parents-in-law now be entitled to a pension from Centrelink? Answer As a starting point, your parents-in-law may have some remedies available through the regulator, the Australian Securities and Investments Commission, and the Australian Financial Complaints Authority. If the fund was recommended to him, or the documentation made false or misleading claims, he may be successful. He should head to the moneysmart.gov.au and afca.gov.au websites to see what steps he can take. In some cases, the AFCA can award compensation. With respect to Centrelink, parent organisation Services Australia has strict rules regarding “failed investments”. Unfortunately, not maintaining the agreed payments to your father-in-law does not automatically mean the investment has failed. Normally, Services Australia will only “write-off” all or some of an asset based on the receiver’s report following a formal receivership. Nonetheless, under the income test, Services Australia can remove the deeming effects of a financial asset and, under special hardship provisions, it can disregard the asset value. Each case is assessed on an individual basis. For these concessions to be considered, your in-laws would need to take all reasonable steps to recover their invested capital. This might include reports to regulators, and commencement of legal action against the investment manager. Question My grandmother is in her 80s and has recently been diagnosed with Alzheimer’s. At this stage she lives at home by herself and is still capable of looking after things, but we are planning ahead for the future. While my mum is likely to be the one to care for her in the future, I will probably end up looking after her finances, simply because I am more computer-literate than my parents. What steps should we be taking to ensure that I can easily manage her affairs? Answer There are a number of things to do. As a starting point, make sure your grandmother completes an enduring power of attorney, appointing yourself as her attorney and possibly others as joint attorneys or as substitutes. She can formerly appoint your mum as her guardian by completing an enduring power of guardianship. You can download free DIY kits for both documents from the WA Government website or engage a lawyer to help you set things up. Once the EPA has been executed, you should forward copies to all of the organisations she deals with, including services like Synergy, the Water Corporation and others. Also ask her to add you as an authorised person with her telephone provider. Note the EPA is a very powerful tool, and you can only use it for the benefit of your grandmother and no one else. Next, she should appoint you as her nominee with Services Australia. This will allow you to interact with agencies like Centrelink and MyAgedCare on her behalf. You will need your own Centrelink service access which can be obtained through the my.gov.au website. If possible, you might consider changing her bank accounts to a locally based bank. In many cases, you can view your grandma’s account via your own login details, and pay her bills online. My personal experience is that it is extremely inconvenient dealing with the large banks on behalf of others using an EPA. In almost all cases, they will require personal attendance at a branch to make any changes to her finances, even paying bills. If she is a pensioner, you can set up a mail redirection service with Australia Post to ensure no important bills or letters are missed. It would be wise to fully explain all that you are doing, and why, to any siblings or other family members who may question your role in looking after her affairs. That might extend to providing regular updates. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association