Age Pension increases: How the Age Pension supports your retirement

On 20 September 2024 the thresholds for the Age Pension income and assets test increased.

These changes are in addition to 1 July increases to the rate of the Age Pension. Fortnightly payments were adjusted in line with indexation based upon a review of the cost of living, the cost of living for pensioner households and average weekly male wages.

This indexation occurs every six months on 20 March and 20 September and is the way that the Federal Government ensures the retirement income support provided by the Age Pension remains in touch with both prices and wages earned by others in the community. As well as an increase to the base rate of the pension and the supplements, the thresholds for both the income and assets tests will also go up. Thresholds for the full Age Pension are adjusted annually as are deeming rate thresholds.

How might this affect your retirement?

Let’s start by considering the role the Age Pensions plays in helping older Australians fund their retirements. (Just a note that people often refer to the Aged Pension, but it’s official name is Age Pension, so that’s worth bearing that in mind if you’re Googling information!)

First introduced in the early 1900s, the Age Pension was established as a safety net for ordinary Australians, to ensure that they did not fall into poverty when they could no longer work. The Australian Age Pension remains a significant support for most retired Australians. According to Treasury’s Retirement Income Review (2020), about 67% of Australians start their retirement with an Age Pension entitlement. By the time they are in their 80s, about 80% of Australians receive a full or part-Age Pension.

How much does the Age Pension pay?

Here are the latest (September 2024) rates for a full Age Pension.

What are the Age Pension qualification rules?

To receive an Age Pension you must satisfy three main requirements:

• Be aged 67 or older
• Be an Australian resident
• You must pass the means test

The means test is based upon an income test and an assets test. You must pass both tests – if you fail either one, you are automatically disqualified.

A part of the means test that many people find confusing is the application of deeming rates. These rates are used to determine the amount you might be earning on your financial assets such as rent  from an investment property, dividends from shares or interest from bank accounts.

The new 1 July deeming rates as set by Services Australia are:

If you’re single
The first $62,600 of your financial assets has the deemed rate of 0.25% applied. Anything over $62,600 is deemed to earn 2.25%.

If you’re a member of a couple and at least one of you get a pension
The first $103,800 of your combined financial assets has the deemed rate of 0.25% applied. Anything over $103,800 is deemed to earn 2.25%.

Not all assets are ‘deemed’ to earn income. For instance, the family car and caravan are exempt. But even though they are not considered to earn income, they do still count in your total assets.

Income thresholds

Here are the income thresholds for a full Age Pension from 1 July, 2024.

Single person

Couple living together or apart due to ill health

Part-Age Pensioners have fortnightly payments reduced as above, until they reach the disqualifying limits of :

Pension Disqualifying Income Limits

Assets thresholds

The asset thresholds have also changed. The following are those applied for a full Age Pension. Assets are generally financial in nature (bank accounts, shareholdings, investment property). An important exemption is the family home. You can live in a $5 million home and if your income and assets are below the thresholds, you will still qualify for an Age Pension.

Limits for a full Age Pension are:

(If you’re a member of a couple, the limit is for both your and your partner’s assets combined, not each of you.)

You will lose $3 of pension per fortnight for every $1000 of assets above this amount until you reach the following disqualifying limits.

Pension Disqualifying Assets Limits

Pension Concession Cards

These valuable concession cards are automatically issued to everyone who qualifies for the Age Pension. They can save you up to $3,000 per year in medical benefits, pharmaceutical discounts, cheaper travel and transport and some energy bill savings. Depending upon the state in which you reside, further benefits may apply.

Work Bonus Credit

Those Age Pensioners who have qualified will also benefit from an $11,800 work bonus credit, which is applied before extra work income is assessed for their ongoing pension payments. The amount of credit applied, however, is dependent upon the period in which the work income is earned.

How does an Age Pension affect your retirement funding? 

Most Australians entering retirement will now have at least modest savings in superannuation. At preservation age (usually 60) these savings can be accessed to help Australians fund their retirements. But as noted above, nearly 70% will qualify for at least a part Age Pension from day one of retirement, so the superannuation they can access will often be used for special projects (renovation, new (non-work) vehicles, medical needs or mortgage reduction). Consequently, the Age Pension can be viewed as the ‘workhorse’ of retirement funding for the great majority.

How do you apply for an Age Pension?

Applications can be made up to 13 weeks before you reach Age Pension age. They are made through Centrelink, the agency which manages Services Australia entitlements and payments. You can apply online (via a myGov/Centrelink account), by mail (filling in the 18-page application and posting it) or at a dedicated Centrelink services centre.

Are there any shortcuts to dealing with Centrelink?

This is a tricky question as Centrelink application and phone call wait times have become legendary. You can pay an agent to process your application on your behalf, and many people find these services much less stressful than doing this themselves. 

If you wish to handle this yourself, it’s wise to ensure your documents are all as requested, as any delays due to incorrect documentation means your application goes back to square one. If you do ultimately succeed in gaining an Age Pension, it is paid from date of application, so ensuring that your paperwork is correct from the start is the smartest strategy.

Is the Age Pension enough to live on?

This is another difficult question to answer, as it depends upon your lifestyle and current spending habits as well as any urgent needs. 

With singles on a full Age Pension now receiving $27,465.60 per annum and couples (combined) receiving $41,404.80, it is clear that tight budgeting will be the order of the day. 

If you own your own home, you may find the expenditure juggle much easier than those exposed to the rental market.

Learn how you could access the wealth in your home

Accessing some of the wealth in your home may help you bridge the gap between a frugal retirement and one with greater certainty and choice.

Why not check whether your home equity could enhance your retirement journey?

Or download the Improve Retirement Planning eGuide to see if there are better ways to make your retirement funding go further.