age pension mistakes

When an entitlement such as the Age Pension has been in place for more than a century, it’s tempting to assume that the rules are well-known and easy to follow. Not so, unfortunately. Every day the Retirement Essentials Customer Services Team hears from retirees who either didn’t know about rules or didn’t thoroughly understand them, much to their financial detriment.

As you know the team at Retirement Essentials is dedicated to helping to make things as easy as possible for those who are planning for or living in retirement. Today we share a summary of five aspects of Age Pension eligibility that continue to confound applicants and result in lower fortnightly payments. These mistakes run the gamut from timing, reporting, complexity of the means test and partner rules to how to value your assets. Read on to see if it’s timely to check how you are complying with all these different requirements. 

1. Timing your application

    Most 60-somethings are aware that the eligibility age for the Age Pension is 67. But waiting to apply until your 67th birthday is not necessary. You can do so up to 13 weeks before. Given current wait times of 2-4 months for applications to be processed, your aim is to receive benefits as soon as you are able. But this doesn’t mean that you should wait until 13 weeks before your birthday to check your potential eligibility. This can and should be done much further in advance. How you manage your money (including your super) for at least the five years prior to retirement can have a major effect on things like gifting, younger spouse options, your access to super and more. Knowing your likely level of eligibility will help to guide your decisions in the lead up to Age Pension age in the most efficient manner.

    2. Getting around to it

      This is also related to timing. However can be much more detrimental than missing out on a month or two of payments. Many retirees simply don’t get around to checking their eligibility or they apply much later than they could have. There is no back pay for this oversight. Yes, just to repeat, even though you may have been eligible years ago, Centrelink will only pay you back to the lodgement date of a successful application. We wrote about this when Geoff, who was out of pocket by more than $70,000, gave us permission to highlight this error. He was philosophical about it, but not everybody would be. It’s a very easy mistake to make if you start retirement self-funded and don’t notice when you have spent your super down to a level that means you are now eligible. Keeping an eye on changing income and assets limits is useful in this case, as well as changes to deeming rate thresholds. But you still have to apply to make things happen!

      3. Double reporting 

        This is another very common error and that’s because it is far from clear on the application for the Age Pension whether super is an asset, a form of income or both. It is logical to understand it as both, but this can lead to ineligibility as Centrelink does not treat super income as income. That’s right, it requires you to list your super savings (whether in accumulation or decumulation) as a financial asset. Centrelink will then deem this amount to earn a certain amount of income and that is the amount used for the income part of the means test. (Bear in mind that Annuities are treated differently). If you have previously missed out on the Age Pension and wonder if you did double enter your super, you can quickly and easily check this using the free Retirement Essentials Age Pension Eligibility Calculator.

        4. Misunderstanding partner rules 

          Again, this is very easy to do. Many people who are older than their partners will apply for an Age Pension first and assume they simply enter their own assets. That’s not how it works. Even though you are applying as an individual, Centrelink will assess you based upon your combined ‘couple’ assets. This applies also to couples who are romantically involved but run separate households. In the eyes of Centrelink, they are a couple.  Knowing this is important as it means that you can review your assets and check if the ‘younger spouse’ rule might help enhance your eligibility or increase your payments. An understanding super consult can help with this.  

          5. Emotional valuations

            It’s extremely common for those applying for an Age Pension to let their hearts rule their heads when stating the value of their assets. In particular, household contents are often valued in the tens or hundreds of thousands of dollars, when Centrelink only requires a garage-sale valuation, say $10,000 or $5,000. Cars, too, can be overvalued. Their showroom price has little to do with their on-road value. Revaluing your car as it depreciates and reporting the lower value to Centrelink makes sense. Any reduced valuation can contribute to increased payments over time. 

            Retirement Essentials offers many different tailored consultations for those seeking bite-sized advice to manage their retirement income and entitlements. Two in particular are helpful for those seeking to understand their Age Pension eligibility, how to apply and how to maximise any entitlements they may receive. Understanding the basics of the Age Pension can help set you up for a streamlined entitlements experience – and more income along the way.

            Why not start by checking your future eligibility using the free Age Pension Entitlements Calculator?

            Next you may wish to talk to an Age Pension Specialist in a 30-minute consultation which will:

            • Assist you with any Centrelink entitlements questions you may have.
            • Help you with specific circumstances relating to your Centrelink entitlements
            • Provide confidence that you understand Centrelink’s rules and their impact on you.
            • Help you understand more about the application process.

            We charge $155 upfront for our consultation discussion

            And if you already understand your Centrelink status, you may wish to learn if you can make any changes to your situation to maximise your Centrelink entitlements.

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            Were you aware of all of these potential Centrelink mis-steps?
            Are there any others you feel our members might like to know?