Well good morning. Today we are starting talking about Age Pension.
Are you getting ready to retire soon? Are you trying to organize your savings to also maximize the Age Pension entitlement?
Or maybe you have retired already, and you keep wondering: Is the level of Age Pension that I'm receiving,
is it actually correct payment? or maybe I could be getting a little bit more?
Or maybe like many retirees and pensioners, you feel like tearing your hair out in despair when dealing with Centrelink office.
Well I know the feeling. Age Pension and planning for retirement is a big topic and it will take many videos to discuss it in details,
but over time I will answer those questions and I will give you suggestions and advice as to the choices that you have,
together with real life examples of how I've assisted some of my clients.
First however, we need to understand when a person becomes eligible to apply for Social Security payment such as Age Pension.
So in today's video I will answer the following questions:
What is the Age Pension age Test?
What is Residency Test?
What are maximum Age Pension rates?
What actually Means Testing is?
So I will explain Income Test, Asset Tests, how they work and how they can impact you.
My name is Katherine from About Retirement. I am Certified Financial Planner and Age Pension and
Retirement Planning are my real passion and believe me, my clients' Age Pension benefits
have been maximized to the levels that they could not even have imagined were possible.
So let's start talking about Age Pension.
Age Pension is designed to provide income support to all the Australians who need it.
There are many tests that you have to meet in order to apply, but the most important are the first two tests and they are:
you have to meet Age Pension age - which is your pension eligibility age,
and then you have to meet the Residency Test.
If you don't meet those two tests there is really no point for you to even continue this discussion,
but if you do, there is a lot for you to gain.
So let's talk about the very first requirement - Age Pension age.
For years the retirement age in Australia was 65, and to make it easy for everyone it was also the age
when you were eligible to apply for Age Pension support.
But in 2017 Australian government made changes and gradually increased this age from 65 to 67.
The general explanation and justification for this change is that we live longer, our life expectancy is greater, therefore we can actually work longer as well.
And this is what government believes most people want and prefer.
Well there is some truth to this, but the real reason is that the number of retirees is growing from year to year.
This is becoming the biggest proportion of our Australian community and the government has to find ways
to reduce the Age Pension expense for the budget, either by delaying entitlement - hence extending the age when you can apply,
or by making eligibility rules tougher and tougher, which we have seen over the years when we look at Income and Asset Test changes.
So the government is trying to make pensioners life a little bit more difficult and I on the other hand, want to help you to find ways
how to get the most out of Social Security system, obviously within allowable limits.
So as we are today, today to apply for the Age Pension you have to be of the age of 66.
However, anyone who was born between 1st July 1955 and 31st December 1956 - you have to reach the age of 66.5.
And if you were born anytime after 1st January 1957, your Age Pension age is 67.
If you are still unsure and unclear about how it all works, you can jump onto moneysmart.gov.au and find Pension Age calculator.
Assuming you pass the Age Test, now let's look and review the second test - Residency Test.
Well, you must be an Australian resident to qualify of course, which means: 1. you are an Australian citizen or
2. you hold a permanent resident visa and I will explain additional criteria in a minute or
3. you hold a protected special category visa which is a special type of visa granted for New Zealand citizens before 2021.
Now, there are also this additional criteria: 1. you have had an Australian residency for at least 10 years,
and at least 5 of those years must have been consecutive. So you better not lose your permanent visa if you travel overseas.
2. you're a woman who married an Australian resident. You have been an Australian resident for at least 2 years and your husband passed away.
So you will be regarded as an Australian resident at that point.
3. you are receiving an Australian Widow's Pension or Allowance immediately before you reach Age Pension age.
So you can just simply apply for the change and transfer of your benefit to Age Pension. Simple.
There are a couple of exemptions such as for example: 1. if you lived in the country that Australia has
International Social Security agreement with, for example New Zealand,
then your residency in that country may count towards your 10-year residency requirement in Australia.
2. that's in regards to refugees, former refugees and their families. You are actually exempt from the residency test.
So what is the current rate of Maximum Age Pension?
Well, at today's date, and I'm recording this in April 2021, the maximum payments are:
for a single pensioner $952.70 cents p.f. which is almost $25,000 p.a
for a couple, per person it's $718.10 cents which is just over $18,500 per person p.a.
If you look at the combined income, the combined income for a couple is $1,436.20, which is just over $37,000 p.a.
If you're a couple separated due to illness, you will always be receiving a single rate each.
So each person will receive $952.70 p.f. which combine annual income amounts to just below $50,000.
Those payments that I've just listed, they also include maximum Pension Supplement and Energy Supplement.
Now Pension rates are indexed to ensure they keep in pace with Australian price and wage increases and
Australian pensioners received the last increase in March 2021.
I've actually created a video that explains the increase of pension and other issues for pensioners so have a look at this video.
So assuming that you pass those first two tests, now you can start calculating how much of that
Age Pension benefit you can actually get by applying two additional Means Test which is: Income Test and Asset Test.
So why is it important to understand those two tests?
In 9 situation out of 10 there will be one prominent test that reduces your Age Pension benefit, or removes this altogether,
and you really need to know which one affects you the most.
You need to know which beast you are fighting against and this is the only way how you stand a chance to winning that war
So let's talk about Income Test.
The government graciously allows you to earn extra income:
For a single person you can earn up to $178 p.f. which is just over $4,500 p.a and you are still eligible for full Age Pension.
For a couple that threshold is $316 p.f. which is just over $8,000p.a.
If your income is greater than those limits, your Age Pension benefit is being reduced by 50 cents in every dollar above that limit,
and eventually will reduce down to zero when:
as a single person you earn more than $2,083.40 p.f which is just over $54,000 p.a.
You might say it's pretty generous.
For a couple, you can earn up to $3,188.40 p.f which is just below $83,000 p.a.
And for couple that are separated due to illness the figures are always as two singles.
It is also important to remember that you can earn up to $300 per person per fortnight from work
and this amount may not necessarily be included in Age Pension Income Test,
if you are registered and eligible for Work Bonus. But this needs to be explained in another video.
So suggestion - sign up to my channel and then you will know when my next video is coming out and when I am actually explaining that topic.
When looking at the level of income you are allowed to earn and still be eligible for Age Pension, or even if it is a small part of it,
you might start wondering why our government is so thoughtful and caring for the needs of pensioners.
Well the truth of the matter is that majority of pensioners miss out on Age Pension benefit not on the Income Test at all but on the Asset Test.
And with deeming rates being as low as they have been for so many years, government is not really risking much of Age Pension overpayment.
Just about the only way when your Age Pension is reduced under Income Test is when you have
another form of a pension for example: pension from overseas or another form of government pension.
Hmmmm...makes you think doesn't it?
Katherine, I think you are being sarcastic right now!
or am I?
Well this is still a general explanation of Income Tests, so I will create a separate video about it
and i will go over all the little details that might be quite important for you.
So hello! This is why I encourage you to LIKE my video and SUBSCRIBE to my channel so when a new video is coming out you will not miss it.
Okay, so now let's talk about Asset Test.
Asset Test is the one that kills off most Age Pension entitlements or reduces your benefit dramatically.
I have seen many cases where under Income Test a single pensioner or retired couple are eligible for full Age Pension or high portion of it
but under Asset Test - peanuts - it reduces to ridiculously low amounts or close to nothing or less which means nothing.
So let's go over those limits right now.
Well, you are eligible for full Age Pension if your assets are below $268,000 for a single pensioner homeowner,
or $482,500 for a single pensioner and a non-homeowner.
If you are a couple homeowners your limit is $401,500 and for a couple combined limit for non-homeowners is $616.000.
If you have assets below that limit under Asset Test, you eligible for full Age Pension.
If you have assets above those limits your Age Pension benefit will be reduced by $3.00 p.f. per $1,000 of assets
and it will cut down to $0.00 for a single pensioner and a homeowner at the level of $585,750
for a single pensioner and a non-homeowner at the level of $800,250.
For a couple that are homeowners that's obviously a combined benefit, combined limit $880,500.
For couple also combined limit, that are non-homeowners $1,095,500
So we have gone over all general rules you need to meet in order to be eligible to apply for Age Pension benefit.
The main problem with those rules is to know how to apply those rules to each investment that you have
and that will vary depending on where your savings have been invested, how long ago, and whether they can trigger any type of Centrelink rules exemption.
So really care should be taken before you decide to commit to any of your savings to any long-term investing.
if they are not helping you with the Age Pension entitlement - well think twice.
So now I'm curious did you find this video helpful? Any "aha" moments? or maybe this video actually created questions or uncertainty?
If yes please leave a comment or your question below this video,
and I will reply to each comment personally.
If however you feel that this topic is just too difficult to deal with, too big, but you still want the best outcome
feel free to contact me and find out how I can help you to increase your income, your Age Pension and improve your security of your assets.
And now I would like to invite you to view some of my earlier videos, specifically designed for retirement:
1. "Retirement income explained" where you can find full explanation of pension funds and how to prolong life of your, for example, your account account-based pension.
2. If you are in the process of preparing yourself for retirement it is the section of videos you want to watch because I explain
all details about superannuation, different types of contributions and how you can benefit from every single one of them.
Thank you very much for watching and I will see you next time.