Five things you may not know
Last week we introduced you to the concept of the five pillars in retirement; the major sources of support that ensure income and financial wellbeing post-work.
These are:
- The Age Pension
- superannuation
- the primary residence
- savings and investments and
- work.
This week we are sharing details on the Age Pension application process as well as the maximisation of entitlements. We are doing this because Australia’s Age Pension provides at least partial retirement income to 80% of Australians by the time they are in their 80s.
First here’s some context about the Age Pension, then we’ll consider ways you can maximise your entitlements – as well as the five things that you may not know that can streamline the entitlement process at any age or stage.
Background
Currently about 70% of Australians over Age Pension age receive a full or part Age Pension.
By the time all retirees hit their 80s, an additional 10-12% will apply for and receive the Age Pension. This is generally because they have spent down their assets and now meet the means test.
Receiving this entitlement is not a homogenous experience. Pensioners can encounter very different levels of comfort in retirement.
The first point of difference is that about 85% of those receiving a full or part Age Pension are living in their own home, so they retain a degree of accommodation security
The balance of those on a full Age Pension who are renting can come close to the generally accepted poverty line which is half the median household income.
Those on a part Age Pension may also have sufficient personal savings to live a more comfortable existence.
Whichever Age Pensioner profile you have, or may be going to experience, it is highly likely that cost of living increases are having a big impact on your weekly budget. Making sure you get as much as you can is of critical importance.
What can you do?
There is a widespread fallacy about the Age Pension that it is important to dispel.
This is that, once you qualify, it is a ‘set and forget’ formula – you will simply receive the same rate of pensions from here on in.
Wrong!
And then there is a similar belief that if you have received a knockback, you are unlikely to ever qualify – again incorrect, as the numbers tell us that most people eventually do become eligible.
So the first important thing to know about the Australian Age Pension is that there is almost always something you can do.
And that you need to commit to keeping up on all the changes that occur frequently during the calendar year. These include base rate changes, deeming rate changes, supplements and income and asset thresholds. Put simply, if you don’t know when these change, you won’t know that you might now qualify for extra income.
The good news is that you don’t have to go trawling through the internet to find this information in a timely fashion. That is what your membership of Retirement Essentials provides. Whenever changes occur, we notify all our members and adjust all online calculators accordingly.
At any time, you can log in and recheck whether your current entitlements might increase, or whether you are now due for payments you had not previously received.
Government departments are not sentimental about mistakes – and Centrelink is no different.
The onus is totally on you to get your details right – and update them as your situation changes.
The hard fact is that you will not get back pay if you have made a mistake in your own favour.
And you will have to pay back if you have made a mistake which works in Centrelink’s favour.
This is why Retirement Essentials has created the Age Pension Entitlement Calculator. Frequent use of this calculator (i.e. when rates or thresholds change), supplemented with a consultation with an experienced adviser if you have further needs, will ensure that you don’t get caught out and miss extra income.
Staying Centrelink savvy
We asked the Head of our Customer Service Team Steven if he would share the five things that people often don’t know about the application and review process. Here are his handy tips:
Bank accounts
Across the years many of us seem to accrue bank accounts like odd socks. Often they have tiny balances, spread across a few different banks. Before you apply for an Age Pension (or reapply if you’ve previously missed out) make sure you consolidate to just the account/s you really need. The reason is that your application won’t be approved before you have supplied all asset information and it may take some time to gather documents across multiple accounts.
Superannuation
You may also have more than one superannuation account. It usually makes sense, regardless of whether you are applying for an Age Pension or not, to consolidate your super. Some accounts may have provision for life insurance so you may be doubling up on these charges as well as administration fees. Finding lost super is now easy, using the MoneySmart online link. It’s not smart to put yourself in the position of needing to chase too many providers for evidence of your accounts for Centrelink dealings.
Foreign pension status
If you are a possible recipient of a foreign pension it is important that you clarify how much you might receive, as Centrelink will assess this income before approving any application. Many people think they will only get a few dollars a week from another government and that this won’t make any difference. It will. So start the ball rolling early by applying and then you have clear guidance on the amount as well as the documentation that Centrelink will require.
Thresholds matter
Applying for an Age Pension is a big job. There is the application and the process of submitting a lot of supporting documentation. It is important you do so as soon as you can (up to 13 weeks before the official pension age) so that you don’t forgo income you could have earned. But there is no point in applying if you are well over the income or assets thresholds. And if you are well over the limits but apply, you won’t be told you are ineligible until after you have completed the entire form and submitted all documentation. You can easily work this out up front by using the Retirement Essentials’ Age Pension Eligibility Calculator, free of charge. If you are well over the limits, then now is not the time to proceed. But you might well be eligible for a Commonwealth Seniors Health Card (CSHC), particularly now that the income thresholds are rising so significantly on July 1.
If you just miss out, then you may want one of our experienced advisers to check your sums as it could still be possible that you are eligible. This is when knowing the fine print of Centrelink rules is a bonus.,
Finalising lodgement
Don’t think that filling in the 26-page form and similar sized income and assets declarations is the end of the matter. Your application is not lodged until all the supporting documentation has been provided. Yes, it’s not done until it’s totally done. So you will not receive back pay to when you submitted the forms – only to when the complete application and other required records are received.
In summary,
Keeping an eye on your full, part or possible future pension entitlements is very important and can lead to increased income in retirement as a reward for your vigilance. If keeping track of what is going on sounds too hard or too tedious, then Retirement Essentials’ Age Pension Eligibility Calculator and adviser consultations can be used to ensure you are not going without your maximum possible entitlements.
Centrelink’s so called ‘gifting’ being added to assets is an extremely complex, difficult and inhumane matter.
Is there a genuine appeal oricess? Does the department or the Minister have discretion in cases where ‘gifting’ is arguably not done to unreasonably qualify for the assetts/income tests?
Hi Jim, thanks for seeking clarity on how gifting works. Technically yes there are some scenarios where gifting can be appealed however it is very limited. For example if you have literally no other assets or income to live off and the gifting is the only asset being counted against you, then you can try to appeal it however even then there are hoops to be jumped through. If you explain your situation to Centrelink they will clarify whether the gifting can be exempt or not, you do not need to escalate the matter or get your local MP involved.
Hi
I am currently receiving a part age pension. How much am I allowed to earn from part time work each fortnight before I do not qualify for my part age pension.
Hi Geoff, thanks for reaching out! If you are single then you can earn up to $2,155 per fortnight but if you are in a relationship then you and your partner’s combined income needs to be less than $3,298 per fortnight. Always remember though, the deemed income from you and your partner’s (if applicable) financial assets is included in your total income assessment, not just employment income. You can learn more about deeming HERE.
I submitted my complete Age Pension documentation on 9 March and have still not received any information from Centrelink.
Hi Jennifer, thanks for reaching out! As you didn’t lodge your claim using our service we cannot comment on the progress of your application specifically however if everything was submitted correctly on 9th March then you definitely should have heard from Centrelink by now. I recommend you call their Age Pension line 132 300 ass soon as is convenient for you.
I applied for the pension but it was declined because I gifted three lots of $10,000 to my nieces and nephew when I sold an investment property 10 months before I applied for the pension… I was told this $30,000 would be counted as part of my financial assets for the next three years is this correct?
Hi Judith, thanks for your question. You are correct regarding your gift impacting your Age Pension. We actually wrote a separate article clarifying the gifting rules that you can read HERE.
If my bank account savings, super & shares have all decreased since I first applied for a part pension, do have to lodge a new claim, or just send them all of the up to date information?
Hi Dee, thanks for joining the conversation! Yes you should provide Centrelink with updated statements for each of your assets so that the values can be updated and your pension recalculated.
I applied for the pension but it was declined because I gifted three lots of $10,000 to my nieces and nephew when I sold an investment property 10 months before I applied for the pension… I was told this $30,000 would be counted as part of my financial assets for the next three years is this correct?
Is it possible to actually make an appointment to discuss applying for the Aged Pension rather than the on line Centrelink procedures
Hi Trevor, thanks for seeking clarity. If you wish to book an appointment with Centrelink then from our experience this is not possible. If you visit your local branch they will likely sit you down at one of their computers to complete the online application yourself. Here at Retirement Essentials do offer Phone Applications whereby you can book in a day/time for us to call you and we will go through the application with you. There are fees involved to use our service as we are a private company, we will send you an email separate to this comment with further details for you to consider and book.
I am presently appling for the pension and have been told numerous times my pension will be back dated to the date i applied true or false !
Every time i submit details i have to chase them as it just sits in the system !!!
Hi Hugo, good question to ask as the answer is not as straightforward as you would think. If you lodged your claim via physical forms handed in over the counter then you are correct that once you claim is approved, you will be back paid to that original date the forms were handed over as if you were approved on day one. This is regardless of the time it takes Centrelink to approve your claim or if you need time to collate your supporting documents after handing the initial forms in.
It works a little differently if you lodged your claim digitally via your online Centrelink account. If you lodge your claim online you must also provide all necessary supporting documents with the claim itself before Centrelink consider it “lodged” and your backpay starts.
Hi there.
How does centrelink work out asset values for investment properties. Is it from council rates etc
Hi Peter. Initially Centrelink take the property value you nominate and then may do a further assessment themselves. The asset value is then the property value less any mortgage against that property.
hi in regard to deeming – the link you provide does not include personal assets ( cars caravan home contents etc ) in the list can u clarify please if these are used in the deeming calculation – i was advised today by RE that they are included thanks
Hi Rod, thanks for commenting! Only financial assets that earn you a return (such as interest payments, dividends etc.) are deemed. Non-financial assets such as cars and contents that do not earn you any return for owning them do not have deeming applied.
I applied for the pension but it was declined because I gifted three lots of $10,000 to my nieces and nephew when I sold an investment property 10 months before I applied for the pension… I was told this $30,000 would be counted as part of my financial assets for the next three years is this correct?
Do centrelink keep track of gains/ losses in assets such as super balances? Super has dropped over the past year so will that be automatically factored in to adjust pension entitlements?
Kind regards
Hi Julie, thanks for getting involved in the conversation! If your super is held in a Self-Managed Super Fund then Centrelink receive no updates and you will need to let them know any changes up or down yourself. If you super is with through a retail/industry super fund though then your super company will update Centrelink in March and September each year on your new balances.
I have had a lot of trouble nailing down the way the total super balance, transfer cap ($1.7m) and the annual non-concessional contributions cap ($110k) combine and the transferring of balances between accumulation accounts and pension stream accounts. For instance, if you have the full $1.7m in a pension stream account and you earn interest but after deducting the 5% minimum withdrawal there is a considerable amount left in the account that exceeds the next years cap can you transfer the excess to an accumulation account? Does exceeding the transfer cap mean that you cannot make the annual n-c contribution ($110k)? If you already have accumulation accounts that in total exceed the transfer cap ($1.7m) can you still add to those accounts if you transfer some of the money to a pension stream account and how much?
Hi Geoff, what great questions! You would be best off speaking with our Financial Adviser who can clarify how it all works and your options moving forward. The consultation can be either online or via phone call, goes for up to 45 minutes and costs $150.
CLICK HERE to book now.
If you are well below asset and income limits and receive a full pension, is there any need to keep updating Centrelink on super balances etc? If your savings dwindle further it’s not as if you’re going to get a bigger pension is it! I understand the need to do this if you receive an inheritance, sell an asset or similar, but why bother otherwise? Likewise with gifting – if all I have in the world is $100,000 and I choose to give half of it away, it’s not going to make any difference to the pension is it!
Hi Robyn, thanks for taking part in the conversation! In theory you are correct, once you are on the full pension then further reductions will not get you any extra. However we recommend you do still notify Centrelink of significant reductions to your balance and/or gifting as it will make your life easier should you have any significant increases later on.
For example. if Centrelink don’t know your bank balance has reduced by $100,000 then when you come back later to let them know about your lotto win of $500,000 they will be adding that extra balance on top of an incorrect figure. This can be resolved but only through more mucking around from yourself now having to provide old statements and clarifying where the $100,000 went.
This is why we recommend keeping Centrelink updated as soon after any significant change as is practical. It is fresh in your mind, easy to provide the necessary documents and saves you hassle later on down the line.
Hi there, last year I received the following income from an estate inheritance.
$6712.00 – Partnerships and Trusts
$107,817.00 – Distribution – Non-Primary Production Income Franked Distribution from trusts
$35,736.00 – Share of Franking Credits
This year would be similar.
My wife receives no such income.
Does this type of income impact my ability or my wife’s qualification to receive an aged pension, or Commonwealth Seniors Health Card (CSHC)?
We have no other assets or income.
Hi Peter, thanks for seeking clarity! Centrelink assess you as single/couple based on whether or not you are in a relationship, not who is applying or who earns the income/owns the asset. Therefore you and your wife would be assessed as one entity and yes your income does impact your wife’s eligibility. Based on the figures you provided your wife would be assessed as exceeding the income threshold for the Age Pension and/or Commonwealth Seniors Health Card.
Hi, Prior to retirement on the 1st July this year, I have cleaned up all our miscellaneous bank accounts so that there are only 2. One of them is joint where any income is received and expenses paid (usually to pay off balance due on credit cards). When we switch to pension phase and draw an income, this money will flow into that account also. My question is, the bank balance on our joint account is going to go up and down (sometimes down close to zero). How often do we need to report these balances that are going to fluctuate. The other account (my partners) is likely to steadily increase albeit at a low rate.
Hi Peter, great question! Centrelink’s position is
“It is optional to notify us of a small change to your:
car, boat, real estate or personal effects of $1,000 or less
shares, investments, bank balances or loan of $2,000 or less.”
Ergo any changes in your bank balance of more than $2,000 should be reported. Having said that, fluctuations do happen and you can use the net balance as a guide. For example if your balance increases by $2,500 but you pay $1,500 worth of credit cards and other bills over the next week, you would not be penalised in this scenario.
There is no set frequency that you must update Centrelink but be mindful that if you take too long to report a substantial and sustained increase, you may be overpaid and asked to repay the extra pension received. On the other hand if you asset balances reduce and you do not notify Centrelink, they will not backpay pension you were entitled to because the onus is on you to tell them when things change.
Good morning Steven
I’m about to lodge my age pension application as I retire on 28/6/2022. In the application it only provides an answer for do you work and what is your gross income – with no provision to state you intended retirement date. By the time they assess my application, I’ll be retired. I’ve received 2 contradictory pieces of advice from Centrelink – one to state no income and the other to provide the income at present time. Can you please advise my best approach
Hi Rae, this is a good question that comes up a lot! As Centrelink will assess and back pay your pension as of the day you lodge the claim, you need to declare your income and assets as of that day. Should you be working on the day you apply and then retire before you are approved you can easily give Centrelink evidence of your resignation so they know not to factor in any income moving forward but they can include it when calculating your back pay.
…and one more question please Steven…
My husband is 4 years younger than myself and still working. He’s a sole trader/franchisee and sometimes he receives quite a large remittance, but for months it may only be trickles of income. If the majority of any large remittance is paid into his super and a claim for tax deduction submitted, will that impact my pension if the income, (once super is paid), remains below $3298.00 for the fortnight?
Hi Rae, sole trader income is assessed a little differently, I recommend you review Centrelink’s guide to understand what your husband will be assessed as earning.