The Government Age Pension might not seem like much to get by, but if you combine it with a regular income from your super fund, you may find things a little easier.
All it takes is a little planning: learning how much you’re really entitled to, how much you can supplement it, and how you can subtly combine it with your super and other government benefits to achieve a better fortnightly income.
Government Age Pension: knowing the basics
If you were born before 1952, you can qualify for an Age Pension via Centrelink from the age of 65. If you were born after 1957, you can begin to claim it at 67. (Those born in between can learn their starting point here.)
The current basic rate for a single pensioner can be as little as $34.40 per fortnight or as much as $794.80. If you have a partner who is also on the pension, each of you is entitled to anywhere between $25.90 and $599.10 per fortnight.
Your income and assets are the biggest factors shaping your pension eligibility.
For every dollar you earn over $164 (every $292 for a couple combined), your pension will be reduced by 50 cents.
By drawing down on your super in regular amounts and intervals of your choosing, you can effectively “top up” the pension to reach your desired amount.
This may seem like it’s eating into your hard-earned savings, but drawing small, well-planned amounts will ensure the balance of your money continues to be invested, potentially earning you more in the long run.
What if I’m earning too much?
You may still qualify if you salary sacrifice a portion of your income directly into super, then drawn on it as a retirement income stream. (This is known as a Transition to Retirement strategy, and regardless of pension eligibility, the tax benefits can make a significant difference to your long-term savings.)
If you aren’t eligible for the pension, a retirement income stream could serve as an ideal replacement income – especially as the balance can remain in super, continuing to work hard.
Finding the right balance can take some careful planning, but it’s not a journey you need to take alone. Most super funds will be able to offer a financial advisor who can look at the big picture and suggest the best next step.
Some upcoming changes may make it easier for those just over the limit. If you own a home and your assets are valued at over $209,000, your pension will be reduced – if not outright disqualified. However, from the 1st of January 2017, this cap will be raised to $250,000.
Once again, your super fund may be the best way to truly understand all the variables that could be affecting pension eligibility, and whether or not this situation can be changed.
What other ways can I supplement my pension?
In addition to the base pension (and a retirement income stream from your super fund), you may also be entitled to up to $65 per fortnight in pension supplements ($49 each for a couple). This includes additional allowances from Centrelink that cover pharmaceutical needs, utility fees and general household living costs.
You may also be eligible for rent assistance on top of the age pension – up to $130.60 per fortnight, depending on your circumstances.
You can also get an additional $14.10 ($10.60 each per couple per fortnight) if you qualify for a clean energy supplement.
Robbie Campo, Deputy Chief Executive at Industry Super Australia, says that while the pension and its supplements might not be enough, “combining them with an income stream can give you far better retirement outcomes”.
“By drawing on your super in regular increments, you can enjoy an immediate uplift in your standard of living, but keep the peace of mind that your super balance is still being invested.”
“If your super balance isn’t as large as you would like, it can still serve you very well an effective, long-lasting top-up to your Age Pension.”