The age pension has risen, but how much are you eligible for?September 29, 2022
There’s good news for pensioners this month with the biggest increase in pension payments for many years starting on September 20, with the rate for singles increasing to $1026.50 a fortnight and to $1547.60 per couple
Keep in mind that this is not some extraordinary largess from the government of the day – it’s simply the normal six-monthly indexation adjustment to the rate of the pension due to inflation. Just spare a thought for renters – the increase in rent assistance is minimal compared to what they are facing in the real world.
The age pension has seen its biggest increase in more than 30 years this month.Credit:Dominic Lorrimer
How do you qualify? First, you have to be of pensionable age which depends on the date you were born. For people born between 1 January 1954 and 30 June 1955 pensionable age is 66, for people born between 1 July 1955 and 31 December 1956 it’s 66.5 years and for those born on or after 1 January 1957 it is 67.
If one partner is eligible, and the other is under pensionable age, the eligible partner receives half the couple’s pension. For example, a 67-year-old with a 59-year-old partner could qualify for 50 per cent of the couple’s pension.
You are tested under both an assets and an income test, and Centrelink applies the test that gives you the least pension. Consider a homeowner couple with an assessable income of $1000 a fortnight and assessable assets of $740,000. Their pension under the income test would be $607.80 a fortnight each, but under the assets test, it would amount to just $292.30 Therefore, they would qualify for the latter.
The value of your assets does not include your family home, while your chattels such as furniture, car and boat are valued at second-hand value, not replacement value. This puts a figure of $5,000 on most people’s furniture.
Note there’s been a slight increase in the cut-off points for the assets test due to the pension increases. For example, the cut-off point for a homeowner couple has gone from $915,500 to $935,000. For a single, the numbers have risen from $609,250 to $622,250.
The income test includes items such as employment income, overseas pensions and rents received – financial assets are given a deemed income. They are deemed to be earning .25 per cent for the first $93,600 ($56,400 for singles), and 2.25 per cent on the balance. For example, if a couple had $493,600 of financial assets their deemed income would be $9,234 a year being .25% for the first $93,600 ($234) and 2.25% on $400,000 ($9,000).
Under the work bonus, an individual can earn up to $300 per fortnight from employment income. This amount is not included in the Age Pension income test. Pensioners can earn a maximum of $7800 per year without the extra income affecting their pension.
The federal government is about to change the pension work test and increase the amount age pensioners and veterans can earn before being financially penalised. As a temporary measure introduced in September 2022, age pensioners will be able to earn an extra $4000 this financial year. They can now earn a maximum income of $11,800 before penalties kick in. This measure is set to end on June 30, 2023.
There are three common mistakes pensioners make, the first being not making the application for the pension soon enough. There are a few hoops to get through and if you leave it until the last minute you may find that months can pass while hiccups are sorted out. The next one is failing to apply for the pension because your partner has a job and earns income. A couple can earn $58,318 a year between them before losing eligibility for the pension so make sure you know the criteria.
The last one is failing to notify Centrelink of changes in your circumstances. Centrelink automatically reassesses your affairs every six months, but you have the right to ask for a review of your pension any time your assets change in value.
If you’re at the high end of the asset range, take advice about the new lifetime income streams whereby only 60 per cent of what you invest is counted for the assets test. The combination of the increased age pension, and the income from these new products, can significantly boost retirees’ income.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. Email: [email protected]
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