Age Pension Increase

Age Pension Increase

“It’s about damn time”

- Lizzo

Despite the growth in superannuation over the past 30 years, the Age Pension is still a significant source income for most Australian retirees. As we have mentioned previously, this will not change until those that are 46 years of age retire (as superannuation only became compulsory in 1994, this age group will be the first to retire with superannuation their entire working life).

According to Rice Warner (independent research house),

  • roughly 39% of Australians of Age Pension age receive the full Age Pension and

  • a further 24% receive a part pension.

That is over 60% of Australians of Age Pension age receive some kind of government benefit.

This number will slowly reduce over the coming years, and we will see Governments implement strategies to reduce the number of Australians on benefits.

However, for the time being, 4.7 millions Australians will receive a boost to their social security benefits amid sky rocketing inflation and rising cost of living.

Each year the Government review the current economic climate and adjust benefits accordingly. This occurs on two occasions, March & September each year. However, the Government announced the largest indexation increase to pensions in 12 years, while other welfare payments will see the highest rise in more than 30 years.

As illustrated, the increase will be approximately 4% or an extra $58.80 for a couple per fortnight.

This will support retirees in battling the rising living costs, with the petrol relief set to come off on the 28th September which will see an additional tax of 22 cents per litre.

There were several other changes that will support retirees, including:

  • Rise to the Asset & Income Tests

    Some Australians will receive a bump to their entitlements, with the Asset test threshold increasing from September.

    For a couple to qualify for the full Age Pension, your combined assets must be below $419,000 if you own your own home, or $643,500 if you don’t own your own home. This is an increase of 3.5% ($14,000 - $22,000 respectively).

    However, to receive one dollar of entitlements and the added benefits your assets need to be worth less than $935,000 if you own your own home, or $1,159,500 if you don’t own your own home.

  • Increase to working limits

    Age Pensioners will be able to earn an additional $4000 this financial year without losing any of their pension. The Government announced the measure (which is subject to the passage of legislation) following the national jobs summit to encourage older Australians to work a bit more if they want to, to assist in solving Australia’s significant labour shortage.

    The temporary income bank top up will increase the amount pensioners can earn from $7800 to $11,800 this financial year, and can be used from December.

  • Changes to the work test

    The work test was changed on 1 July 2022. Under the change if you are under 75 years of age during the financial year 2022-23 you can make non-concessional or salary sacrifice contributions, provided your super balance is less than $1.7 million in July 2022.

However, with superannuation accounts down 10% over the past 12 months, many retirees are questioning the longevity of their capital and what steps they can put in place to ensure they continue to meet their ongoing living requirements.

As illustrated, the Government has made all these changes which are not easy to understand. When building your retirement plan, there are several factors which you need to consider to ensure you minimise your overall tax liability, whilst maximising your Government benefits.

Remember that what your brother, sister or friend are doing may not be appropriate for your specific circumstances. Each and every individual situation is completely different.

We recommend you speak to your trusted Newcastle Financial Planners, who are retirement experts, to see how they can support you.

Matthew McCabe