If you’re a self-funded retiree in Australia, you can’t possibly be eligible to get the Age Pension, can you?
Well, so you thought. But, then you hear stories of people with a big house and half-a-mil receiving Age Pension payments, as well as the health care card! What’s the go?
This article discusses whether self-funded retirees can get the pension and, if so, how much pension they are entitled to.
Self-funded or not, being eligible for Age Pension payments can greatly assist in covering expenses throughout retirement – preserving your superannuation pension for longer.
Also, if you are interested in other benefits make sure to check out our article on self funded retirees entitlements.
Can Self-Funded Retirees Get The Pension?
There are two types of pensions that a self-funded retiree is entitled to: The Age Pension and a Superannuation Pension.
Let’s take a look at the differences between the Age Pension and a superannuation pension and how much self-funded retirees are entitled to.
As a self-funded retiree, you are entitled to the Age Pension. The Age Pension is a Government funded income stream paid to pensioners who have attained Age Pension age.
The Age Pension age ranges from 66 to 67 depending on the month and year that you were born, as shown below.
The pension rates for self-funded retirees are the same rates as they are for all Australians. The Full Age Pension rates are detailed in the table, below:
|Per Fortnight||Single||Couple (Each)||Couple (Combined)||Couple (Each, Separated by Illness)|
|Age Pension Payment Rate||$1,064||$802||$1,604||$1,064|
These Age Pension rates are reduced for each dollar earned over the lower Income Test threshold, or every thousand dollars of assets that exceed the lower Assets Test.
The Age Pension payment rates are indexed twice per year in March and September. The indexation rate is calculated on inflation, cost-of-living increases and wage movements.
The other pension self-funded retirees are eligible for is a superannuation pension.
A superannuation pension is commenced by using your superannuation to start a pension once you meet the superannuation definition of retirement, or age 65, whichever comes first.
A superannuation pension is a flexible pension that allows you to nominate the level of income you like, subject to a minimum pension income amount. However, the more income you draw down each year, the quicker your pension balance will run out.
Also, your superannuation pension balance will be invested and therefore the balance will fluctuate up and down in value, while providing you with an income stream along the way. So investment earnings within the account will influence how much income you’re entitled to and for how long.
How to Use Pensions to Self-Fund Retirement
As an Australian, you are likely to be eligible for Age Pension payments at some stage in your life, as well as have some superannuation which can be used to start a pension.
The general self-funded pension plan setup for retirees is to first calculate how much income is needed to cover retirement expenses on a fortnightly basis. Then, the difference between this amount and the amount being received in Age Pension payments is the income amount you should nominate to receive from your superannuation pension. It’s that simple.
If you require any lump sum amounts to cover capital expenses, such as holidays, home renovations, gifts, etc. then you can simply take that as a one-off lump sum withdrawal from your super. In addition to this, it is prudent to keep an amount in your personal bank account (e.g. $20,000) for emergencies, unforeseen expenses and general cash flow requirements.
Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
Frequently Asked Questions
Listed below are some frequently asked questions relating to self-funded retirees and the pension.
What is the Difference Between the Full Age Pension and Part Age Pension?
The difference between the full-Age Pension and a Part-Age Pension is that the full-Age Pension refers to the fact that you are entitled to the maximum Age Pension rates, as listed above. The Part-Age Pension simply means that you are eligible for a portion of the maximum Age Pension payments rates, because your income or assets exceed the lower means-tested thresholds, but not the upper-thresholds.
Due to the Age Pension being a means-tested income stream, the payment rates reduce as you exceed the lower threshold of either the Income Test or the Assets Test. If you exceed the upper threshold of either the Income Test or the Assets Test, you will not be entitled to receive any Age Pension payments. The assessment is conducted on an ongoing basis.
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