Questions from clients who are on the brink of retirement, or are just beginning their retirement plans, usually involve asking “can I get the Age Pension?” and concerns around what they are eligible for from the AgePension.
As we will go over below there are rules and tests you must meet and pass in order to receive the Age Pension.
This can often seem daunting and confusing if you are looking into this yourself for your own retirement plan.
A way to alleviate this confusion is by having one of our financial advisors create a retirement plan for you and your goals.
We assess your entire financial situation and what you want out of retirement, and a big part of this is assessing what your individual eligibility is for age pension entitlements.
What Is the Age Pension?
The Age Pension is there to support older Australians who need it and also encourages pensioners to maximise their overall incomes.
Pension rates are indexed every year to ensure they keep pace with Australian price and wage increases.
The Age Pension requires you to meet a residency rule, an income test, and an asset test.
It is a significant pillar of the Australian retirement system. The Retirement Income Review found that as of June 2019, 71% of those aged over 65 were recieving the Age Pension or other pension payments.
For those that are on these payments, over 60% were receiving the full Age Pension.
To be eligible for the Age Pension you generally need to be an Australian resident and have been so for the past 10 years.
For 5 of those years, you need to have had no break in your residence in Australia. You may need to establish your Australian residency with a Residence in Australia and other countries form.
There are some other considerations that would still allow you to receive the Age Pension, such as being a refugee, having a partner die who was an Australian resident and you have lived here for less than 10 years, or lived and worked overseas in an agreement country.
You and your partner will have all your sources of income reviewed, which includes all financial assets such as superannuation, all assets you own personally, and any trusts or private business and companies owned in your name.
These different forms of income that will affect if you can get the Age Pension will be all gross employment incomes, deemed income from financial investments such as shares, distribution of dividends, income from outside of Australia, or net rental income.
The below income tests are the standard rules for the Age Pension, but this could be different based on your personal circumstances, so it is best to have a financial advisor scrutinise all the eligibility criteria for you.
If you are completing some sort of work, you can earn up to a total amount and not have your Age Pension reduced depending on if you are a single or couple.
If your income goes above a certain level, you will not receive anything from the Age Pension.
Your cut off point could be higher if you are receiving Rent Assistance, or lower if you do not live in Australia.
The assets test also determines how much you are entitled to from the Age Pension.
It is determined on the value of your assets reaching a certain limit and if you are in a relationship or not.
Your assets will include any property or possessions you own in full, in part, or have an interest in, which includes anything owned outside of Australia and debts owed to you.
To receive the full Age Pension, your total assets cannot be over the below limits based on your personal circumstances.
Important to note, if you are a member of a couple, the limit is on yours and your partners combined assets.
To receive the partial pension, your assets cannot be over the below limits.
As of July 1st 2021, your partial pension will be cancelled if your assessable assets exceed the following limits:
After you have gone through all tests to gauge your eligibility for the Age Pension, you would receive some of or all the below rates depending on what the income and asset test indicated.
There are additional supplements for the pension that is for helping retirees with the cost of electricity that are also included in the table below to give you a full picture of what you could receive based on your personal circumstances.
Things like dormant Family Trusts can also cause havoc on your Age Pension entitlements even if none of the assets relate to you.
This also applies to private companies/businesses, known as attribution rules.
It can be quite complicated so is the reason why anyone with a Trust should seek financial advice.
Even by explaining all tests and the rates, this does not give you a clear picture on how much you can receive if you are receiving a partial of the pension.
That is why when you are assessing the question of “can I get the Age Pension?”, it benefits your retirement plan if this is completed by a financial advisor.
Not only will you now have an advocate scrutinising what you will be eligible for, but they will also make projections on what your retirement nest egg will provide for you well into retirement and what other social security payments you will apply for the further you get into retirement.
If this causes any concerns or you have any more queries on the Age Pension, please feel free to get in contact with one of our financial advisors.