"Hi, I’m Gerry, in my early 50s and aiming to retire around 65. I’m trying to figure out how the Age Pension might influence the timing of my retirement and my planning for retirement funding. Can you explain how the Age Pension works and what I’d need to qualify?"
-Gerry from Eagle Farm in QLD
Top answer provided by:
Mark Candy
Hi Gerry and thank you for your questions.
To assist, I will address your questions in reverse order, if that’s okay.
First off, eligibility requirements, and then how the Age Pension works!
The first requirement that must be met to be eligible for the Age Pension is reaching the minimum age.
From 1 July 2023, the eligibility age increased from 66 years and 6 months to 67 years (this applies to anyone born after 31 December 1956). Obviously, we do not know what the future holds with regards to the Australian Government’s ongoing support for the age pension, however, we are hopeful that the pension age is likely to remain at 67 years for some time.
The second requirement is around Residency Rules. You must be an Australian resident to qualify for the Age Pension, along with meeting at least one of the below criteria:
- You have been an Australian resident for at least ten years (and at least five of those years have been consecutive).
- You have been a female Australian resident for the past two years and you are the widow of an Australian resident.
- You were receiving an Australian widow’s pension or allowance (or a partner allowance) immediately before you reached your pension eligibility age.
The third requirement is passing the Means Test. The Means Test for the Age Pension includes both an assets test and an income test. You will need to pass both tests to be eligible and the results will affect how much Age Pension you’re entitled to receive.
It is important to note that the amount of Age Pension you are paid, is based on the test that gives you the lower amount and you must keep Services Australia (Centrelink) informed of any changes to your financial circumstances or to your living arrangements.
Assets Test
Simply put, the market value of any assets that you or your partner own will be assessed by Services Australia (Centrelink) to determine your potential eligibility for the Age Pension.
Currently, your residential home is not included in the assets test, but nearly all your other assets will be, including superannuation.
There are limits on the value of the assets you (and your partner combined) can own to be eligible for either a full or part pension. Such limits depend on whether you own your own home, as well as your living arrangements (including if you have a partner and whether they are age-eligible for the pension).
These limits are outlined in the table below:
Latest limits apply from 1 July 2024 to 30 June 2025. Source: Services Australia and SuperGuide.
Should you exceed these limits, then your pension reduces by $3.00 per fortnight for every $1,000.00 of excess assets. For example, if your assets exceed the limit by $35,000, your fortnightly pension payment would decrease by $105 per fortnight (i.e. 35 x $3).
Income Test
Services Australia (Centrelink) will also assess your income from all sources (inclusive of any income from superannuation and any other investments outside of superannuation, that you may hold), to determine your eligibility for the Age Pension.
Services Australia (Centrelink) will however use deeming rates to calculate a standardised/consistent return you would likely receive from different investments you may have, irrespective of whether you receive that return, or not.
The deeming rates/thresholds that apply until 30 June 2025 are outlined below:
Source: SuperGuide.
Latest limits apply from 1 July 2024 to 30 June 2025. Source: Services Australia and SuperGuide. Annual amounts are approximate.
Should your income exceed the above, you may still be eligible for a part Age Pension. This amount though will progressively decrease by 50 cents for every dollar that you earn, until it cuts out totally.
Importantly, from 20 September 2024 the maximum full Age Pension increases by $28.10 per fortnight for a single person, and by $21.20 per person per fortnight for a couple.
The rates therefore for a full Age Pension for Australians for the period 20 September 2024 to 19 March 2025 are noted below:
- Single: $1,144.40 per fortnight (approximately $29,754 per year)
- Couple (each): $862.60 per fortnight (approximately $22,428 per year)
- Couple (combined): $1,725.20 per fortnight (approximately $44,855 per year)
- Couples separated due to illness each receive the Single rate (see above), which combined is $2,288.80 (approximately $59,509 per year)
Annual amounts are approximate.
Remember, if you do exceed the assets test or income test limits, you may still be eligible for a part Age Pension. The amount that you end up receiving though will be reduced progressively, depending on the value or your assets and income.
Given all the above Gerry, there is value in seeking guidance from a financial adviser before you consider retiring and potentially applying for the Age Pension. They can help put things into perspective and work with you on tracking towards whatever your retirement goals maybe.
All the best,
Mark
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