SASS members & the Age Pension

As you approach retirement, you might be thinking about how your finances will go without a regular income from employment. You may ask yourself, ‘Do I have enough to enjoy retirement?’ The good news is, the Age Pension might provide a source of income in retirement to supplement your savings, providing a financial back-up and safety net to ease your concerns.

Some SASS members may think they don’t qualify for the Age Pension. But that may not be the case. If you don’t qualify for a full Age Pension, you may qualify for a part Age Pension or other Centrelink benefits, even if you receive a retirement income from your super or other savings and investments you may have.

The Age Pension and your eligibility can change over time

If you don’t qualify for the Age Pension right away, your eligibility may change over time. Initially, you may find yourself ineligible due to high income or asset levels. However, changes such as reduced income from work or investments, depletion of retirement savings, or significant shifts in the value of assets can shift the balance.

The Australian Government also regularly updates the asset and income thresholds for the Age Pension. So while you might not be eligible now, this could change in the future, even if your assets and income stay the same.

How Centrelink assesses your entitlements

Step 1: Your age

Depending on your birth date, the qualifying age starts from 65 to 67. If you’re planning to retire around 63 years of age like most SASS members, be aware that you may not be able to access the Centrelink Age Pension for some time.

Step 2: Your assets

The assets test includes most of the assets you own, such as your furniture, caravan and car, importantly it doesn’t include your family home. It will also include your financial assets such as cash, term deposits, shares, investment properties, and managed funds. When it comes to super, most retirement income accounts are included and money in accumulation accounts will be included from your qualifying age. This can be important for couples as your assets will be assessed together.

Defined benefit pensions do not count towards the assets test.

For contributing or deferred members of SASS, your benefit will only be included in the assets test once you reach your qualifying age for entitlements.

Step 3: Your income

For financial assets such as shares, term deposits, managed funds, money in accumulation Super accounts after qualifying age, and most account-based pensions, Centrelink will deem these investments to earn a certain rate of income. Any actual income from these assets will be ignored. When it comes to investment properties and salary, Centrelink takes into account the actual income you’ve received.

Some older account-based pensions and annuities may also be included in the income test, but the treatment of these will depend on the type of income stream they are.

For those SASS members who retained the feature of a lifetime defined benefit pension when they were transferred to SASS, the tax-free portion up to a maximum of 10% of the pension payments can be exempt from the income test.

Managing the Age Pension to avoid an unexpected curveball

Life events and financial changes can also impact your Age Pension payments. To avoid the Age Pension turning from a safety net into a retirement ‘curveball’, it’s important to regularly review your situation. Centrelink requires you to notify them of any changes to your assets or income within 14 days.

Once you start receiving payments, you need to update Centrelink if your income or asset values change to avoid receiving the wrong payment. Centrelink asks you to update your asset values twice a year (October and April). If changes fall outside these timeframes, you need to notify Centrelink within 14 days of these changes.

Underpayments

An underpayment could happen if you pre-pay a holiday or complete a renovation to your existing residence. In this instance, your assets could fall in value, and you could be entitled to more income. The sooner Centrelink knows, the quicker your payments can be reviewed to make sure you receive the correct amount.

Overpayments

An overpayment could happen if you downsize your home and spend less on the new home you purchase. This is because your family home is generally excluded from the assets test, but the excess proceeds made from the sale are not. Other life changes such as death, divorce, returning to work or receiving an inheritance can also have implications.

If you don’t let Centrelink know in time, you may need to pay back the overpayment amount. Centrelink will do this by reducing your entitlement until the overpayment has been paid back. If you’re no longer entitled to receive the Age Pension, Centrelink will ask you to pay back the overpayment amount.

More than just the Age Pension

When you receive the Government Age Pension, you also get a Pensioner Concession Card. This provides discounts on medicine, health and other Government services. Depending on the state you live in, you can get discounts on gas, water, electricity, car registration and public transport. This means the Government Age Pension helps pay for and lower your expenses too.

Even if you’re not eligible for the Government Age Pension, you may be eligible for the Commonwealth Seniors Health Card. Some state and local governments offer extra health, transport, education and recreation concessions.

Looking for help regarding SASS?

An Aware Super financial planner can provide you with advice tailored to your situation. Using our powerful modelling software, we will take into account all your sources of income in retirement, including the Age Pension and project how long your money will last.

Where to next?

Disclaimer

This information is of a general nature only. Before taking any action, you should consider your personal circumstances, financial situation and needs, and if appropriate seek professional advice. It does not contain any recommendations to you in relation to current products that you hold.

Please read our product disclosure statement and Target Market Determination (TMD) available at retire.aware.com.au/PDS before making any decision about Aware products.

Financial planning services are provided by Aware Financial Services Australia Limited (AFSAL) (ABN 86 003 742 756, AFSL 238430), a wholly owned by Aware Super. Issued by Aware Super Pty Ltd (ABN 11 118 202 672, AFSL 29330). You should read the Financial Services Guide before making a decision about using AFSAL services.