Age Pension rates: How much is it and how does it work?

The Age Pension is the country’s main income support payment from the Australian Government for people who have reached retirement.  This is a basic explanation of the eligibility requirements for the Age Pension in Australia and how much income it could provide.

What is the Age Pension?

The Age Pension in Australia is designed to provide income support to older Australians who need it, while encouraging pensioners to maximise their overall income. According to the Australian Bureau of Statistics , the government pension remains the main source of income for most retirees over the age of 45 years old.

How does the Age Pension work?

The Age Pension is an income paid to eligible Australians by Centrelink, a division of the Australian Government, on a fortnightly basis. How much you receive depends on how much other income you receive and how much your assets are worth.

Am I eligible for the Age Pension?

In 2020, the Age Pension eligibility criteria you must meet includes:

  • Be the qualifying Age Pension age, which is at least 66 years old
  • Meet an income and assets test
  • Be living in Australia (Australian resident for at least 10 years in total)

What is the age test?

The age test is the qualifying age you must be to receive the Age Pension in Australia. The Age Pension age is currently increasing from 65 to 67 years; it will increase by six months every two years until the Age Pension age is 67 in 2023. This means that the qualifying age will increase as follows:

  • July 2019: The qualifying age will increase to 66 years.
  • July 2021: The qualifying age will increase to 66 years and six months.
  • July 2023: The qualifying age will increase to 67 years.

You can work out what the qualifying age will be in your case by looking at your year of birth:

When will I be eligible for the Age Pension?
Date of birth Qualifying Age
1 January 1954 to 30 June 1955 66 years
1 July 1955 to 31 December 1956 66 years and 6 months
From 1 January 1957 67 years
Source: Services Australia, July 2020

If you also want to know what your superannuation “preservation” age will be, you could use the free online MoneySmart Super & Pension Age Calculator. Just enter your month and year of birth and it will tell you the age at which you will be eligible for the Age Pension (your Age Pension eligibility age) and when you will be able to access your superannuation (your super preservation age).

5-Star Rated Superannuation Funds

If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.

Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group you selected.

What is pension means testing?

The means tests or pension means testing is used by Services Australia to determine your overall wealth and therefore eligibility to receive government benefits such as the Age Pension. Australian pension means testing includes two tests: the income test and the asset test.

The income test

The Age Pension income test determines the amount you are currently earning. Your Age Pension will reduce 50 cents for every dollar if your income exceeds $178 per fortnight (or $316 for a couple).

For this test, your income includes:

  • Income from financial investments
  • Income from your superannuation fund
  • Employment income if you’re still working
  • Business profits, including profits from a farm
  • Dividends from share investments or trusts
  • Income from rental properties, boarders or lodgers
  • Reportable superannuation contributions made to your superannuation fund
  • Income from outside Australia, including non-Australian pensions

Income does not include current support such as government allowances or rent assistance and scholarships for study or research.

The deemed income test

Some financial assets and investments are also deemed(assumed) to give you a small amount of income in interest, even if they’re not actually giving you income at the moment. Deemed investments include:

  • Savings accounts
  • Term deposits
  • Managed investments
  • Share investments
  • Account-based income streams (such as account-based pensions)

For example, a term deposit does not give you interest (a type of income) until the term matures, but Services Australia will assume it provides a small amount of interest throughout the term.

Deeming is aimed at making the income test fair for everyone and it means that you will receive your Age Pension payments in a regular and predictable way, rather than having your payment change every time an investment produces interest.

An investment is exempt from deeming if you can show that the investment has failed completely and you have begun legal action to recover your original capital investment.

The asset test

Services Australia assesses how much you own in assets when determining your eligibility for the Age Pension. Your assets both within and external to Australia will be assessed and similar to the income test, if your assets have a net worth over a certain threshold your Age Pension will decrease, or possibly be denied.


How much income can I earn before my age pension is affected?

Single Person
Earning up to $178/fortnight Age Pension is unaffected
Earning more than $178/fortnight Reduced by 50c for every dollar over $178
Earning $2,066.60/fortnight Cut off point: Not eligible for Age Pension
Couple living together (‘couple combined’)
Earning up to $316/fortnight Age Pension is unaffected
Earning more than $316/fortnight Reduced by 50c for every dollar over $316
Earning $3,163.20/fortnight Cut off point: Not eligible for Age Pension
Couple separated due to ill health
Earning up to $316/fortnight Age Pension is unaffected
Earning more than $316/fortnight Reduced by 50c for every dollar over $316
Earning $4,093.20/fortnight Cut off point: Not eligible for Age Pension
Source:  Services Australia, July 2020

There is also a transitional rate pension that applies to people who had been receiving a pension on 19 September 2009 and whose pension rate would be lower if calculated using the new income test. This transitional rate will be paid until the pension aligns with the current income tested rate (and is no longer higher).

What is the residence test?

Another Age Pension eligibility criteria is that you must be an Australian resident. To be eligible for the Australian pension you must be an Australian resident for at least ten years in total,  with at least one stay lasting a minimum of five years.

There are exceptions to the residence test for certain people, including:

  • Refugees and former refugees
  • Women who are on a Partner or Widow Allowance before reaching the Age Pension qualifying age
  • Widows who are an Australian resident for two years before reaching the Age Pension qualifying age

There are also exceptions to the residence test for people who lived or worked in a country that has an international social security agreement with Australia.

What are the Age Pension rates?

Below are the amounts that you could receive each fortnight on various rates of the Age Pension, depending on your eligibility and your personal and financial situations, at the time of writing.

The Pension Supplement payment is added to the Age Pension base rate payment for eligible pensioners, in order to help meet daily household and living expenses.

The Energy Supplement payment is added to the Age Pension base rate payment for eligible pensioners, in order to help meet the costs of clean energy supply to their home.

Single
Maximum base rate $860.60
Maximum pension supplement $69.60
Energy supplement $14.10
Total $944.30
Couple Combined
Maximum base rate $1,297.40
Maximum pension supplement $105.00
Energy supplement $21.20
Total $1,423.60
Couple separated due to ill health, each
Maximum base rate $860.60
Maximum pension supplement $69.60
Energy supplement $14.10
Total $944.30
Source: Services Australia, July 2020

What if my situation changes?

If your situation changes at any time while you are receiving the Age Pension or after you’ve made a claim to receive the Age Pension in Australia, you need to let Centrelink know. Usually, you will need to let Centrelink know within 14 days (because the payment is made fortnightly).

Is the Age Pension a fixed rate or indexed?

The Australian pension payment rates are indexed twice a year to make sure they are still in touch with the cost of the living and the average wage that Australians earn. The cost of living is measured by growth in the Consumer Price Index (CPI, a.k.a. inflation) and the Pensioner and Beneficiary Living Cost Index.

Receiving the Age Pension

If you’re receiving the Age Pension, you may be looking for a good savings or transaction account to put it in. We’ve researched and rated over 400 savings and transaction accounts to help you determine value.

The table below provides a snapshot of high interest savings accounts available on the Canstar database, with links direct to the providers’ websites. Check upfront with your provider and read the PDS to confirm whether any particular product meets your needs. Please note this table has been formulated based on our regular saver profile, with $5,000 savings living in New South Wales. Results have been sorted by Star Rating, and then by provider name (a-z). 

Original author: Regina Collins and TJ Ryan.

This article was reviewed by our Senior Finance Journalist Ellie McLachlan and Sub-Editor Tom Letts and  before it was published, as part of our fact-checking process.


About Regina Collins

Regina Collins was previously a writer within the Editorial team at Canstar and was responsible for producing financial content designed to help empower consumers to take greater control of their finances. Regina is graduating from her studies in Bachelor of Communication, Major in Digital Media with Minors in Law and Journalism at QUT in 2019.

About TJ Ryan

TJ was previously a finance journalist at Canstar, preparing a variety of articles from simple-to-understand explainers of financial products through to reporting on industry trends. She graduated from QUT with a Bachelor of Law and Bachelor of Fine Arts, Creative Writing and worked in communications for a number of years before joining Canstar.

 

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