Close to 75 per cent of Australians over the age of 65 currently receive either a full or part government age pension . As the superannuation system matures and account balances grow, fewer people will rely solely on the age pension but most retirees will still qualify for some level of government support. Even if you expect to be a self-funded retiree, chances are you could still qualify for a part age pension and other benefits.
The qualifying age for the age pension is 65for men and currently 64 for women, rising to 65 by 2014 . But this is set to change. The government plans to gradually increase the age to 67 for everyone over the next decade. To be eligible for the pension you must meet certain criteria, including being an Australian citizen or a permanent resident for 10 years, at least five of them consecutive. Once you qualify, you may also be eligible for other benefits, such as rent assistance and the pension supplement to help with household bills.
How much can I get?
The maximum rate of the age pension for single retirees is currently $772.60 a fortnight, including the pension supplement, and these rates are adjusted for the cost of living each March and September. Couples receive up to $1,164.80 a fortnight combined, including the supplement. The amount of age pension you actually receive will depend on whether you are single or part of a couple, your income and assets and whether or not you own your own home. The assets test in particular is surprisingly generous. Single retirees with their own home can earn up to $1,697.20 a fortnight, have up to $707,750 in assets and still receive a part pension. Couples can earn up to $2,597.60 a fortnight and have assets of $1,050,000!
Income and assets tests
When determining age pension eligibility, two tests are applied. Centrelink determines the pension based on the test that produces the lowest pension — either the assets test or income test. The amount of pension you are entitled to reduces by 50 cents for every dollar of no pension income you receive. This includes income from part-time work, certain superannuation pension income and deemed income from bank interest and other investments. Single people can receive $152 a fortnight before they begin to lose any pension, while couples can receive up to $268 combined.
Your pension entitlement will also decrease by $1.50 for every dollar of assets above a certain threshold. Assets include cash in the bank, superannuation and other investments, holiday homes, boats, caravans and household goods, all valued at current market price. Some assets are exempt, such as pre-paid funerals and asset test exempt (ATE) complying income streams, such as complying pensions and term allocated pensions (TAPs)a.
A single homeowner can have assets worth up to $192,500 and receive a full age pension while couples can have up to $273,000 combined. Non-homeowners can have even more – up to $332,000 for singles and $412,500 for couples.
Take the case of John and Carol
John and Carol are 67 and 65 respectively and are about to retire after working part-time in their business, which they sold a year ago. They ask their financial adviser if they will be eligible for a part age pension or other benefits and concessions. They own their own home worth $780,000, they own their car which is worth $15,000, they have a day-to-day bank account with $5,000 in it and superannuation of $510,000 combined. Their adviser says they should be eligible for a part age pension of about $786 a fortnight, as well as a Pensioner Concession Card. John and Carol leave feeling more confident that they will be able to lead a fairly comfortable retirement.
If you are eligible for the age pension, you will also get a Pensioner Concession Card. This entitles you to reduced cost medicines and discounts on a wide range of goods and services, such as rates, energy bills, car registration and public transport, depending on the state or territory you live in. States and territories also offer a Seniors Card to people over 60 who are no longer working full time. This entitles holders to discounts on anything from public transport to restaurants and lawn mowing. Just flash your card at service providers and ask what is on offer. Self-funded retirees are not completely left out either. Single retirees with income below $50,000, and couples with income below $80,000, may be entitled to the Commonwealth Seniors Health Card. This provides discounts on prescribed medicines, health services and transport. So the message is clear. Even if you think you don’t qualify for the age pension it is worth setting aside some time to assess your financial position and to seek advice about what may be on offer.
1 Reforming the Age Pension, Rice Warner Touchstone
Newsletter, August 2012, p. 5
2 Department of Human Services, 2012, viewed 12
December 2012, http://www.humanservices.gov.au/
3 Your Life Choices, 2012, viewed 12 December 2012,