The age pension is one of the Government’s biggest spending programs, and a key source of income for many retirees. Here’s who can get it, how much it pays, and how the means tests work.
The age pension is a Government payment designed to give older Australians a basic income in retirement. It’s paid fortnightly by Services Australia, through Centrelink.
It’s one of the biggest items in the federal budget, and for many retirees, especially those with smaller super balances, it’s their main source of income.
Who’s eligible
To qualify, you must have reached the age pension age, which is 67. You also generally need to have been an Australian resident for at least 10 years, including at least five years in a row.
You must also pass the means tests, which look at how much income and how many assets you have.
The means tests
There are two tests: the income test and the assets test. Services Australia works out your payment under both, and pays you whichever gives the lower amount.
The income test looks at what you earn, including wages, and income from investments. Instead of using the actual returns on things like bank accounts, shares and super in retirement phase, the Government assumes they earn a set rate of income, a process called deeming.
The assets test looks at the value of what you own, such as savings, shares, super, investment property, cars and household contents. Your family home isn’t counted, which is why the rules have long been debated.
Under both tests, you can have a certain amount before your pension starts to reduce. Above that, your pension falls gradually until it cuts out. The limits are higher for homeowners than for non-homeowners under the assets test, and are different for singles and couples.
The Work Bonus lets pensioners earn some income from work each fortnight without it reducing their pension.
How much it pays
The maximum rate is set for singles and couples, and includes the basic payment plus supplements. Rates are indexed in March and September each year, based on increases in prices and wages, so they keep pace with living costs.
Pensioners also get a Pensioner Concession Card, which provides cheaper medicines and other discounts.
The pension and super
Australia’s retirement system is designed to work in layers: the age pension as a safety net, compulsory super, and voluntary savings.
As super balances grow, fewer retirees are expected to rely on a full pension, but many will still receive a part pension. Planning how much to draw from super, and how that affects the pension, is one of the most common reasons people seek retirement advice.
Payment rates, thresholds and rules change regularly, so Services Australia’s website has the current figures.
