How often do these changes happen?
Pensions are indexed twice a year to take into account inflation and increases to the cost of living. Before this year, the last increase to the Age Pension was in March 2020 – despite being reviewed in September 2020, there was no change for the first time since 1997. This led to uncertainty over whether there would be an increase in 2021, with the news of a confirmed increase welcomed by the more than half a million people who rely on it as a sole source of income – many of whom were already struggling.
The next potential change will be 20 September 2021. Further increases are likely but not certain as the Australian Bureau of Statistics evaluates these increases based on changes in the Consumer Price Index (CPI), Male Total Average Weekly Earnings, and the Pensioner and Beneficiary Living Cost Index.
What’s changed this time?
The main change implemented in March is the increase itself – from 20 March 2021, the maximum full Age Pension increased $8.40 per fortnight for a single person, and $6.30 per person per fortnight for a couple.
The new rates for a full Age Pension for Australian residents for the period 20 March 2021 to 19 September 2021 are listed below:
- Single: $952.70 per fortnight (approximately $24,770 per year)
- Couple (each): $718.10 per fortnight (approximately $18,670 per year)
- Couple (combined): $1,436.20 per fortnight (approximately $37,341 per year)
- Couples separated due to illness each receive the Single rate (see above), which combined is $1,905.40 (approximately $49,540 per year)
Note: Annual amounts are estimated by multiplying fortnight amounts by 26. The figures above include the pension and energy supplements.
How does getting the age pension work?
There are a few basic requirements to receiving Age Pension in Australia. These are:
- You must have reached the Age Pension eligibility age, which may vary depending on your date of birth. Currently, the age for eligibility is 66.
- Satisfy residency requirements.
- Pass income and assets test.
- If you’re in a couple and only one partner has reached the eligibility age, then the eligible partner will receive half of the regular couple’s pension amount.
The income and assets test determines both your eligibility and how much you can receive. An overview of these criteria is below:
- To qualify for a full Age Pension as a single person your income must be below $178 per fortnight (approximately $4,628 per year), but you can still be eligible for a part Age Pension if you earn less than $2,083.40 per fortnight (now approximately $54,168 per year).
- For a couple, to qualify for the full Age Pension your combined income must be below $316 per fortnight (approximately $8,216 per year), but you can still be eligible for a part Age Pension if you earn less than $3,188.40 per fortnight (now approximately $82,898 per year).
- It’s important to note that you can earn up to $300 per person per fortnight from working and this amount is not included in the Age Pension income test.
- The lower asset limits are $268,000 for a single pensioner and, for a couple, $401,500. Once these levels are exceeded the pension tapers until it reaches the upper cut-off point, where no pension is payable.
- The cut-off point for a homeowner couple has gone up to $880,500 and for a single pensioner to $585,750. For non-homeowners, the numbers are $1,095,000 and $800,250, respectively.
- 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 rates, rather than replacement value. This usually puts a figure of about $5000 on most peoples’ furniture.
- The income test includes such items as employment income, overseas pensions and rents received.
It also includes financial assets, these are given a deemed income and includes interest-bearing deposits, shares, managed funds and money in superannuation – if the fund member has reached pensionable age.
How can I prepare for receiving the age pension or make the most of what I am already receiving?
Age Pension and Centrelink rules can be complex and sometimes challenging to interpret for an individual situation. It’s a good idea to seek professional help for your circumstances before making any major financial decisions, especially for your retirement. Spending the money now on financial advice could pay off in the long run to ensure you’re on track to sustain your lifestyle and make the most of your retirement.
The Moreton Group specialises in retirement planning and would welcome the opportunity to be part of your journey, give us a call today on 07 5606 6055 to start the conversation.