Everything you need to know about the new Age Pension increase

Thousands of Starts At 60 members are about to get a pay rise, with many more likely to be entitled to a government age pension for the first time.

Another substantial increase in the Age Pension has been announced, with the single rate of age and disability pensions increasing by nearly $20 a fortnight and a combined $30 a fortnight for couples. The new rates will apply from March 20 and has the added impact of lifting the upper pension cut-off thresholds. That means that thousands more seniors are now eligible for a part pension.

How did this happen?

Centrelink income support payments are indexed twice per year in March and September and are linked to a variety of measures.

Allowance payments such as Jobseeker and Youth Allowance are tied to the Consumer Price Index or CPI.

On the other hand, pension payments are tied to inflation as measured by the CPI but also the Pensioner and Beneficiary Living Cost Index or PBLCI. The PBLCI excludes some components such as mortgage repayments, given many pensioners don’t have a mortgage.

Confusing things further, the base pension is also tied to 41.76 percent of Male Total Average Weekly Earnings.

In essence, whichever of the three measures goes up by the most in the preceding 6 month period, that is the one that’s latched onto.

This time round, CPI won the race, resulting in the single full rate of payment increasing by $19.60 a fortnight to $1,116.30 a fortnight. Couples receive an extra $14.70 each to lift the pension to $841.40 or a combined $1,682.80 a fortnight. The $841.80 a fortnight might apply if only one member of a couple is eligible, perhaps because of an age difference. That provides a grand annual total of $29,023.80 per annum for singles and a combined $43,752.80 for couples.

What else you should know

While those reliant on the pension will welcome the increase, seniors who may have just missed out on a part-pension because of the means-test system should re-check their position. There’s a chance that they might now qualify.

The means testing system applies an income test and an asset test to determine the amount of pension payable. Whichever test produces the lowest pension payable is the one that is used. That means you could sail through on one test, but miss out completely on the other.

The income test provides for an income free area of $204 a fortnight for singles and a combined $360 a fortnight combined for couples. Once this level is exceeded, the pension is clipped by 50 cents a fortnight until it is cancelled altogether. The effect of a pension rate increase, is to lift the amount you can earn in Centrelink Assessable income before you lose the pension altogether.

The upper cut-off for a single after March 20 will be $2,436.60 a fortnight or up to $63,351.60 per annum until you lose the pension altogether under the income test. For couples, this figure is $3,725.60 a fortnight or $96.865.60 per annum.

Under the asset test, assets over the lower thresholds result in the pension being reduced at the rate of $3 per fortnight for every $1,000 over. The cut-off limit for a home owning single rises by $6,500 to $674,000 and for couples, by $9,500 to $1,012,500.

Non home-owners for both singles and couples are allowed an additional $242,000 in assets.

Remember, the house, no matter how much it is worth, is ignored if it sits on less than 2 hectares and is not being used for business purposes. And even if you just sneak under the thresholds by a whisker, you still get a reasonable fortnightly payment.

The actual pension is made up of a number of components. There is a base rate, plus combined supplements to cover things like pharmaceuticals, energy and phones. Under a quirk in the system, these payments are an all-or-nothing arrangement. You don’t get a part supplement like you get a part-pension.

Provided you are under the upper means-test thresholds, the minimum a single person can receive will be $58 a fortnight and for couples, $43.70 each or a combined $87.40 a fortnight.

The next significant movement is now less than three months away. On July 1, the lower-means test thresholds will change meaning even more people might qualify for the first time.

Stay tuned to Starts at 60 for more details on these upcoming changes as they emerge.

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IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.