Using Age Pension changes to your advantage

The Age Pension payment changes on 20 September could mean so much more than a few extra dollars. Here’s how to use this trigger to maximise your income sooner rather than later.

As we advised late last month, 20 September will deliver a fortnightly $29.70 increase to singles on. A full Age Pension and $44.80 combined to couples. (If you’re on a part-Age Pension, this extra amount will be paid on a pro-rata basis).

These increases may not at first glance seem to amount to much, but there are ways of using this update that can help ensure you make the most of every last cent. And it’s worth remembering, the increase in the base rate of the Age Pension is not the only change. There are quite a few other adjustments that offer a really useful trigger to review your current situation and/or entitlements.

Here are the three most important reviews you can undertake to ensure you are on top of your income.

1. Extra money and some ways to use it

The singles increase of about $15 per week, couples $22, is a useful amount. Yes, it might be described, somewhat disparagingly as just three or four cups of coffee. But when calculated as an annual amount, it’s $772 (or $1165 in the case of couples). Most retirees will pay much more respect to this order of income. Here’s how it could be used:

Upgrading health insurance cover if you feel yours is a bit light on
Faster debt reduction, given current market interest rates of around 5.5% on home loans. Compound interest can be harnessed ‘backwards’ as well – if you pay off more than your interest on a loan, your reduction in principle means that over time your regular interest payments will decrease.
$15-20 per week could also cover a higher speed internet package, weekly cinema or gallery visits or a high proportion of the average retiree’s energy bills. Paying for these goods and services by using automatic transfers to suppliers or another ‘spending’ account is a way to manage this money purposefully.

2. Increased income and assets thresholds

The means test can be difficult to understand. It’s a combination of two tests – income and assets – and whichever test results in a lower Age Pension entitlement is the test which Centrelink will use to determine your eligibility and any payments. Additionally your assets are deemed to earn a certain amount of income, so this creates a multi-layered (some might say messy) calculation.

And you can, at any time, use the free Retirement Essentials Age Pension Eligibility Calculator to ascertain how both these tests will be applied to your income and financial assets. But is it possible to change your outcome if it’s unfavourable?

Often it is. As the limits for the income and assets test are increasing on 20 September, those who were previously ineligible may now receive a small part-Age Pension payment as well as the valuable Pension Concession Card (PCC).

Checking your status with the Age Pension Eligibility Calculator also means you will be able to review and reassess your stated assets and current income declarations. Questions will inevitably arise.

Maybe the extra few hours of work you’ve been offered aren’t worth it?
Maybe you’ve spent down some super or private savings but haven’t yet updated Centrelink?
Maybe your car has depreciated meaning your total assets are now lower?
Perhaps your original valuation of your household assets was emotional and not what Centrelink uses as a benchmark – garage sale value?

It’s really important to review, revise and if necessary, reacquaint yourself with your actual Age Pension status – this may even come as a pleasant surprise.

However, the third important 20 September check is a caveat on the above. And that is …

3. Deeming rate increases

Since 2022 deeming rates have been frozen. The current rates will rise by .50% on 20 September. Here’s how they are changing:

Singles: Were .25% for balances below $64,200, now moving to .75%, balances above this amount moving from 2.25% to 2.75%

Couples: Were .25% for balances below $106,200, now moving to .75%, balances above this amount moving from 2.25% to 2.75%.

In essence, retirees holding financial assets (cash, shares, superannuation etc) will now be deemed to be earning more. For some retirees who are well below the thresholds, this change will make little difference. Others, however, may find they will now just miss out on their Age Pension entitlement. This means that their Pension Concession Card will no longer be valid (although there is some leeway if the loss of the entitlement is due to work income). Those who do lose Age Pension payments can, of course, now apply for a Commonwealth Seniors Health Card. Here’s how.

But 20 September changes to the deeming rates do not necessarily mean you will need to forgo Age Pension benefits. Why not try to see this change as yet another trigger you can use to thoroughly scrutinise your financial assets – are they completely and accurately up to date as per the questions above? Are the putative values placed upon your non-financial assets correct? And would any planned, imminent spending nullify the change in your deemed income? Time to do the sums again!

Using the Age Pension Eligibility Calculator makes this very easy. And if you are a ‘borderline’ scenario, you may benefit from one of the two different consultations outlined below. Over the past few years the team at Retirement Essentials has helped thousands of Australians to not just apply for, but continue to maximise, their full entitlements. You don’t need to understand each and every rule to improve your situation. Nor do you necessarily need to lose entitlements when you are deemed to earn more.

All Retirement Essentials calculators will ‘go live’ with 20 September changes from that date. Do yourself a favour and check your own situation without delay – remember that any changes you report won’t result in a back pay of entitlements, so it’s up to you to ensure all your financials are totally accurate and reported as soon as they occur.