October 1st marked the celebration of International Day of Older Persons, making this month an opportune moment to start meaningful discussions regarding financial well-being among seniors.
One area that often raises numerous questions is the topic of the age pension.
At First Financial, our expertise lies in retirement planning, which includes a deep understanding of the age pension. To assist you further, here are answers to frequently asked age pension questions.
What is the age pension?
In Australia, the age pension is a vital support system for our elderly citizens, ensuring they can meet their fundamental living needs. Eligibility for this pension depends on factors such as age, residency and additional criteria. The government conducts means testing to allocate higher amounts to those with greater need.
Twice a year (March & September), Australian pension rates undergo indexing to align them with changes in consumer price index (CPI), wage increases and other economic shifts.
How does the age pension assets test work?
Centrelink assesses your eligibility for the age pension by evaluating the combined market value of assets owned by both you and your partner. It’s important to note that your family home is exempt from the assets test, while your superannuation balance is considered. To qualify for a full or part pension, there are asset value limits in place, and they depend on whether or not you own your own home, are a single or couple.
The evaluation of assets for the assets test assessment deducts any outstanding debts associated with assets, excluding your primary residence, from their market value.
In addition to the asset test, Centrelink also make an assessment of your income. Whichever test, assets or income, results in the lower fortnightly payment is the amount Centrelink will pay you.
What changes have been made to the assets test recently?
On September 20, 2023, the age pension assets test saw an increase, raising the thresholds to accommodate the current economic climate. Notably, a couple can now hold assets totalling just a fraction over $1 million (excluding their family home) and remain eligible for a part age pension.
How will this affect pensioners? If you already qualify for an age pension, Centrelink will automatically apply the increased rates to your fortnightly payments, starting from September 20 onwards. If you were previously ineligible but were near the threshold, it’s advisable to reassess your entitlement.
If you receive Rent Assistance along with your pension, your cut-off point is higher. You can access the rate information by referring to the Payment and Service Finder. For a complete list of asset limits for singles and couples, homeowners and non-homeowners, see Services Australia.
Speaking of assets, what constitutes an asset?
According to Centrelink, assets encompass various financial holdings, including bank accounts, cash, term deposits, managed investments, superannuation, bonds and gifting.
Additionally, assets include the contents of your home, cars, personal belongings, real estate (excluding your primary residence), sole trader businesses, partnerships, private companies and assets inherited from deceased estates.
How often should I update my assets with Centrelink?
Typically, Centrelink will complete an annual balance update for most recipients; however, any time your situation, or the value of your assets, changes, you should report it as soon as possible. You must report changes over $2,000 in financial assets within 14 days.
What is the current payment rate?
The Australian Age Pension, or aged pension, offers a maximum fortnightly payment of $1,096 for individuals and $1,653 for couples per fortnight.
Are there other pension benefits available?
Yes. If you qualify for the age pension, you may be eligible for other similar benefits, including Centrepay, Work Bonus and various Pensioner Concession Cards. There is also income support available for veterans.
Centrepay is a cost-free service enabling you to automatically deduct bill payments from your Centrelink payments. Work Bonus is a payment that provides the option to earn additional income without impacting your pension.
Talk to the financial planning experts
At First Financial, our advisers have extensive experience in helping individuals and couples plan for a successful retirement while balancing their need and eligibility for the Australian age pension.
If you need help understanding the age pension, the recent changes to the assets test, or how certain financial decisions can impact your potential pension income, contact a member of our team today.
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