Understanding the Age Pension income test
Most pensions, allowances and concessions from the government are subject to income and asset limits that can affect the amount of pension you can expect to receive.
If and when you apply for the Age Pension, you will be subject to the Age Pension income test, which determines your eligibility based on your amount of yearly income.
Understanding these limits is a crucial part of managing your transition to retirement. As super fund Equip says, “Age pension entitlements, part time work, and your investment choices can help top-up your retirement funds, and help your money last longer.”
Age Pension Income Test
The Age Pension Income Test is set up to ensure that the Age Pension is only going to those who need it most. According to the Australian Government Department of Human Services website, the age pension is subject to the following limits (effective from 20 March 2016):
- Single pensioners with a fortnightly income over $162, receive a pension reduction of up to 50 cents per dollar for every dollar they earn over $162.
- Couples with a fortnightly income over $288 receive a pension reduction of up to 50 cents for each dollar over $288.
It’s also important to understand that if you earn enough income over the course of a fortnight, your pension payment will reduce to $0. The limits are as follows:
- Single’s pension payments reduces to $0 once their fortnightly income reaches $1,909.90
- Couple’s pension payments reduces to $0 once their fortnightly income reaches $2,922.80.
- Couple’s pension payments who have been separated due to ill health reduces to $0 once their fortnightly income reaches $3,783.60.
What does this mean?
The big take out from the Age Pension Income Test shouldn’t be feeling as though there’s a need to stay under the income limit, rather the importance of setting up multiple, reliable streams of income. This blog post Equip cites Australian Institute of Superannuation Trustees Chief Executive, Tom Garcia who notes, “Superannuation doesn't exist in a vacuum. Most people approaching retirement will draw an income that is a combination of both super and the age pension.”
This video from Equip supports this idea of a multi-layered approach to retirement income, noting the importance of drawing retirement income from the age pension and super and even other sources like part-time employment and other investments.
This information is undeniably important, but sometimes can be quite difficult to get your head around. This is why events like the Equip Retirement Expo (May 17) is so valuable.
The Equip Retirement Expo gives you the opportunity to speak to industry representatives at pop-up booths, discover new tools and products for a happier, healthier retirement and better calculate and compare your super options.
To register for Equip’s Retirement Expo, simply click here.
Equip manages $7 billion of investments for members working across a wide range of Australian industry sectors. This superannuation fund has been providing strong investment performance and has been a reliable provider of retirement benefits for over 80 years.
Related links:
A third of Aussie women are retiring in poverty
10 exciting retirement adventure ideas
Is it a bad idea to withdraw all of your super at once?