This past week, a casual conversation with adviser, Megan Marshal, totally nailed the difficulty of managing retirement income.
‘Understanding the rules is the hardest thing for most people’, Megan said, ‘Particularly making connections between the Australian Tax Office, Centrelink and superannuation. All the rules are so intertwined, it makes it close to impossible to understand what to do unless you work in financial services’.
We agree. But the good news is that we take all our members’ feedback onboard and use it to create plain English explanations of all aspects of retirement income. This benefits members in two ways. Firstly it gives you the detail that you need to better understand your options and when to use them. And secondly, we subscribe to the belief that knowledge is power, so in sharing these frequent explainers, we hope to increase your confidence in your own decision-making powers.
Today we tackle one of the commonest Age Pension myths – that where you start is about where you’ll end up. This is not usually the truth. And here’s why.
Most people will qualify for a full or part Age Pension at age 67. Recent data from the Department of Treasury suggests that two thirds (67%) of Australians start retirement with this valuable government benefit. To become eligible, you will need to pass the means test which has a limit for both income and for assets. You will also need to be a resident and to have reached age 67.
But over time, your situation is likely to change dramatically
Most older Australians now retire with at least some superannuation savings. Typically they will draw down this super in a retirement income stream and thus reduce these savings, i.e. their assets. As the lower balance is noted by Centrelink, so the retiree on a part pension will be entitled to a higher fortnightly payment.
Eligibility also widens
The data shows us that the 67% of people receiving an Age Pension in their late 60s will increase to 80% of people who are in their 80s. So the vast majority of those aged 80-90 will receive an Age Pension and many will have ‘graduated’ from a part Age Pension to a full one.
Indexation delivers more
There’s one other way that the payment you ‘end up’ with is higher, and that is because of the legislated adjustments to the Age Pension which occur twice a year, in March and September. This is when the Age Pension is indexed in line with Consumer Price Index (CPI) increases as well as the Pensioner Beneficiary Living Cost Index (PBLCI) and the Male Total Average Weekly Earnings (MTAWE)
In addition to increases in the base rate of the pension, adjustments are also usually made to the pension supplement. The Income test and Asset test limits are usually increased as well. This ensures that payments to older Australians stay in touch with both prices and salaries. This system works well. In 2023, for instance, the fortnightly rate of the Age Pension (including supplements) increased by $32.70 (singles) and $24.70 (couples) in September and $37.50 (singles) and $28.20 (couples) in March. It’s useful to bear this six-monthly indexation in mind when planning your retirement income, as the amount you are likely to receive in 10 or 20 years’ time could be far higher than you think. (All Retirement Essentials calculators, including the Safe Spending Simulator, make adjustments for such increases so that all projections are as accurate as possible).
As Megan noted, it’s difficult to be across all the rules. But understanding how the Age Pension works, and how it is likely to become a bigger part of your income as you age, is a great start.
Many retirees are underpaid in retirement.
Make sure you’re not one of them!
It’s often a misunderstanding of the rules that can lead to incorrect Centrelink assessments and lower fortnightly payments. It’s more than worth the time and money to check that you have maximised all of your entitlements so you know you are receiving the maximum possible income.
Our Maximising your Entitlements consultation is designed to help you do just that.
And those who are in doubt as to if or when they might become entitled to an Age Pension can check your eligibility for free with our Age Pension Entitlements Calculator.
Were you aware of the three ways that the Age Pension can increase over time? Are there any other aspects of this income stream that you feel are under the radar? Please let us know so we can write about those too. Or maybe there is some part of the Age Pension entitlements process that continues to confuse?
Hi, can you please explain the following scenario:
Spouse 67 and wants to retire; other spouse 62 and not working. Does the 67 year old get full pension?
Ages as above but 62 year old working – does pension 67 year olds pension get reduced or cancelled? Thanks.
Hi Gale, thanks for your question! In this scenario the 67 year old will get up to 50% of the couple’s Age Pension depending on the value of the couple’s (including the younger partner) income and assets. The reason for this is because the couples Age Pension is designed to be paid 50/50 to each person, so if only one person is currently eligible then the max they can receive is their 50% share.
Most of the pension questions, here and in other publications, seem to refer to people on self-managed funds or Social Security payments.
There is little mention of people on Defined Benefit Schemes such as the old government employee ones, or me, an ex-Commonwealth Bank employee, also on a defined benefit scheme.
I don’t really have any problems or questions, but we seem to be the forgotten ones.
My super payments have been coming in regularly since I retired in1998 and are indexed annually.
There is probably nothing that can be done or needs to be done – just hope that the payments keep rolling in, or to my wife after I am gone.
Should I be doing something- or just leave well enough alone?
We have no mortgage, either on our home or on our three rental properties in Sydney.
Thanks
I suspect a life pension along with three investment properties would disqualify you from any Centrelink…
I’m 67 my partner is 62 have small amount in super how much can my partner earn in his full time job for me to get full or part time pension
Hi Paul, thank you for asking us for further assistance! For you to receive your full 50% share of the couple’s Age Pension ($826 p/fn) then you and your partner’s combined income would need to be less than $360 per fortnight. To receive at least some Age Pension, just no the full $826 then your combined income needs to be less than $3,666 per fortnight.
Hi I would like to work part time what is the absolute maximum, I can earn before my benifits are cut off completely.
Also if I salary sacrifice, is that included in the calculations.
cheers bryan
Hi Bryan, thanks for your query! The maximum amount you can earn depends on whether or not you have a partner. If you are single then the max you can earn is $2,397 p/fn which is $62,332 p/yr. Alternatively if you have a partner then the maximum you and your partner can earn (combined) is $3,666 p/fn which is $95,336 p/yr.
Hi, I am 69 my wife is 64 working full time as a Primary School teacher. I earn a small amount as a part time gardener and draw a monthly super payment. My wife commenced full time work this year previously she worked emergency teaching rounds. Since I advised Centrelink this change my Age Pension ceased. I am committed to report each fortnight result is the same. How long do I need to report? Will I continue to receive zero until my wife retires from teaching?
Hi Leo, thank you for sharing your situation. If you know you and your wife’s income will continue to be the same amount and exceed the threshold you can call Centrelink to try and get the reporting turned off. Depending on the situation though they may require you to continue reporting.
Centrelink values my assets at $850,000. But I have only about half that in bank accounts / super, and I have a mid-range car and usual household furniture. How do they get this figure, and how can I get them to re-evaluate?
Hi John, thanks for sharing your scenario! You can review your income and asset values via your Centrelink online account or alternatively you can call them on 132 300 to discuss it and/or request a detailed breakdown to be posted to you.
Hi , I will turn 67 next year,at present i still working part time receive part carer payments from Centre link.
I have received notice yesterday to ask me to consider change from carer payments to age pension when I turn 67 next year, but I am not sure carer payments VS age Pension , which one I should consider? And which one more benefit for my current situation? Can you please explain or advise to me please?
Firstly, thank you for assisting with my application for the aged pension it went smoothly and the information on the forms was spot on.
I am currently working and my gross income (and my partners assessed as a sole trader)is under the partners amount of $3666 / fortnight and I am receiving a part pension which I could have received 12 months sooner :(.
My question is, when my wife becomes retirment age (turns 66 in June) so another 12 months after that 🙁 , she is a sole trader with a bed and breakfast business, we submitted her annual business tax return with my application for the age pensionand do not have to report income fortnightly for her. What happens when she turns retirement age in June 2025, how much can we both earn (not work bonus) before it starts to effect the full pension ? It would be difficult to get a job in which you only earn 360/fortnight its hardly 2 days work ! Can she still run the bead and breakfast and we both received the full pension ?
Thanks again for your assistance.
Hi Norm, thank you for your kind words, much appreciated! Regardless of you/your wife’s age, the income thresholds remain the same. If you wish to receive a full Age Pension then your combined income must be less then $360 p/fn which is $9,360 p/yr. You can still receive a part pension so long as your combined income is less then $3,666 p/fn which is $95,336 p/yr.
I receive a part aged pension as well as an allocated pension from my super. The allocated pension is cpi’d twice a year so it keeps it’s real value over time. My Question is why does my part pension go down each time my allocated pension is altered for inflation?
Hi Graeme, each time you begin receiving more income form any source, Centrelink will factor that in to your Age Pension payments and potentially reduce them regardless of the reason for the increased income.
I am 81 in next April 2024, my wife was 76 this month. we own an investment property , which has been valued to 950K and thus we lost our part age pension . The property is rented for $630/week through agent.
What can we do to get part pension and concessions?
Thank you
My husband and I are in our 70’s. We receive a small part pension. We do not have any superanuation. We rely on a small amount of money we’ve saved ( and are living on) and the part pension but because we have assests( a house we built for our son that is in our name) we don’t receive a full pension. Centerlink keep increasing the value of the house of our son’s and we then loose money from our pension. If the pension continues to decrease, we will have no other income.
Is there any thing we can do to stop the increases in the value of the 20 year old house so we keep our part pension?
Just a word of advice to anyone thinking of having property when they retire. My understanding is that the property’s value will be increased regularly by Centerlink and you have no say as to how it reduces the pension you receive if it is considered as an asset.
I turn 67 next June and although i only work casually i would like to retire, my wife will be 65 at this time and has no intentions of retiring, how can i calculate if i am eligible for a part pension , my wife has the bulk of the super in her acct and i was going to use mine to pay off a small loan we have
Hi Garry, thanks for seeking our assistance! You can LOGIN and have a play with our calculator yourself or if you’d like a bit of guidance then you can book a consultation with us HERE.
I am 63 now and have not been employed since 58 (as no one want to hire over 50’s ) I have been and still am living on my savings. As an Australian that has paid tax up to 58 am I allowed any help from the government?
My age pension is Feb 2024 and I have applied for pension and waiting for Centrelink’s decison. In speaking with Centrelink, they calculated I should be entitled to part pension of $800 pf even though I am drawing a self pension of $750 pf from my own pension account. I like to work part time to supplement my travel. You said earlier that “single then the max you can earn is $2,397 p/fn which is $62,332 p/yr.”. Please clarify if the $62,332 p/yr includes my own pension income of $19,200 = $43,132 p/yr is all I can earn. OR I I can still earn $62,332 p/yr? Thank you for your help and clarification.
Hi Bee, thanks for seeking further clarity! I can confirm that the amount you draw down from your superannuation pension is NOT treated as income so you do not have to factor it in to the income threshold.
My fiancé and I would like to get married but we are concerned about finances.
He is a pensioner (69) doesn’t own a home but has $350,000 cash/assets
I am 65, working part time and own my home with $50,000 cash.
I work 5 days pf and earn $1260pf, I could drop 1 day and earn $1020 which I would like to do. Our monies came from recent inheritances – so only a new factor in this equation.
My question is – if we were to marry and live together what would happen to his pension and would I be eligible for a pension at 67 as I would like to retire and spend time together whilst we can. (as I think is possible)?
Thanks
Hi Sandra, thanks for reaching out for further support! It is great that you are considering you and your fiancé’s situation and how Centrelink will assess you. To give you a proper answer we’d need to talk about a few extra things that are more personal/specific and not best aired in a public forum like this. As such I’d recommend you book one of our Entitlements Consultations HERE. Generally speaking though whether you get married and live together or not you are already a couple and so Centrelink would be assessing him as such already (presuming he has told them he is in a relationship with you).