The changing dynamics of later-life relationships are never better demonstrated than in the diverse range of ‘separation’ lifestyles that older couples can now experience.

Don’t just take it from me. In response to these developments, Centrelink itself has created different classes of separation in couples and, for the purposes of assessing eligibility for the Age Pension and even aged care fees, have come up with different rules that apply, depending on the nature of the separation.

But, before analysing those classes, it would be helpful to understand how Centrelink treats a couple for the purpose of assessing their eligibility for an Age Pension. A couple can be married, in a de-facto relationship or have a registered relationship (for example, same-sex couples). In those circumstances, when assessing the couple’s pension entitlements, the assets and income of the couple are combined, irrespective of who owns the assets or receives the income.

However, a couple may not be a couple for Centrelink purposes in the following circumstances, namely, where they:

• live separately and apart
• are separated by illness or
• are separated but live under the one roof.

Here’s a brief explanation of each and the pension implications it entails:

Living separately and apart

The essence of this status is that a relationship has ended or ceased to exist. If so, the two people are no longer treated as a couple. To establish this, they must show that they are living apart permanently or indefinitely and that there has been an estrangement or breakdown of their relationship. This status will not apply if they are separated by illness, such has one person having moved to a nursing home, or economic circumstances, such as one person living elsewhere for employment purposes.

If a couple qualifies under these requirements, they are treated as single and their individual assets and income will not be combined when calculating pension entitlement.

Separated by illness

For a couple to fall into this category, certain criteria must be met, namely that they are unable to live together in their home and this:

• is due to illness or infirmity of either or both of them
• results in their living expenses being or likely to be greater than otherwise and
• is likely to continue indefinitely.

If a couple satisfies these criteria, they will be assessed against the single rate of pension even though Centrelink will combine their income and assets as if they were a couple.

Is your Will up to date? Get our Online Will Kit here.

Separated under the one roof

This is by far the most complicated and personally intrusive class you could fall into. I once had a client who told me at our first meeting that she had just celebrated her ‘silver separation’. She had been separated from her husband for 25 years even though they had been living in the same house the whole time.

In a nutshell, a couple’s relationship will be assessed against five broad criteria, which are:

• financial aspects of the relationship e.g., who pays for what if anything
• nature of the household e.g., sleeping in separate rooms
• social aspects of the relationship e.g., do they socialise together
• sexual relationship e.g., the presence or otherwise of intimacy
• nature of the commitment to each other e.g., do they share information and plans.

If the criteria are satisfied, i.e., they may live together but lead totally different lives, then each member of the couple will not be treated as a couple, but as an individual.

What does it all mean?

Given the fluid nature of later-life relationships, the impact of these rules cannot be underestimated or understated.

However, there is one particular area that is becoming difficult if not, vexed. It relates to older people becoming ‘companions’ or, at least on the surface, something less than de-facto.  Even companionship can push the boundaries of relationships. It might do you to check out the definition of a ‘de-facto’ couple to see if you are, or are becoming, more than companions.

Where these types of relationships develop, it can have interesting implications in many areas – on the Age Pension, on aged care fees and even on wills. For those who may fall into any of the above categories, or feel themselves falling into one, it might be a good idea to get some good financial advice about where you stand, just to be sure.