Does my superannuation affect my Age Pension eligibility?

The Age Pension is a fortnightly sum paid to Australians aged 67 years or over. It’s one of Australia’s most important safety nets which ensures Australians have a minimum income in retirement if their superannuation isn’t enough.

The catch is that it isn’t available to everyone. Your eligibility depends on your age, income and your assets and the amount you get can vary significantly.

But the question many Australians approaching retirement ask is: What about my superannuation balance? Does that affect my Age Pension eligibility?

Lets break it down, with everything you need to know about your super and the Age Pension.

Age limit and maximum payment

The Age Pension is available only to Australians aged 67 years and older.

It is paid on a fortnightly basis up to a maximum total payment of $1,200.90 per fortnight for singles and $1,810.40 for couples combined. 

These sums include the maximum basic rate, the maximum pension supplement, and the energy supplement.

As I mentioned above, the final amount you’ll receive (if anything) is heavily dependent on Centerlink’s income and asset test. 

And these also include your superannuation.

Yes your superannuation affects your Age Pension eligibility: Here’s how

The income test assesses all of your income, pooled from all sources. That includes anything from superannuation income, investment income, part-time wages, bonuses, or commission payments. It’s applicable regardless of your age. 

According to Services Australia, assessable income includes but is not limited to reportable super contributions and from any funds invested in superannuation if you’ve reached Age Pension age, or any funds that are invested in a super pension fund or income stream, regardless of age. 

The asset test includes everything you own in full, in part, or have an interest in, but excludes the home you live in. Again, this includes your superannuation balance (as an asset). 

To ensure the system is fair, Centrelink assesses you under both tests and applies what it calls the ‘lower rule of two’. This means your potential fortnightly Age Pension is calculated under both tests, and the one that results in the lower payment is the amount you will actually receive.

What are the rules for the Age Pension income test?

In order to receive the full Age Pension, single Australians (as of the 1st of July) can earn a total of $226 per fortnight, while couples can earn up to $396 per fortnight from all pooled sources, including and superannuation income.

But it’s still possible to receive a part pension if you earn over those thresholds. 

From the 1st of July, singles can earn up to $2,627.80 per fortnight. Couples (living together) can earn up to $4,016.80 per fortnight and still qualify for at least a part-Age Pension. 

But, it’s important to note that your income is assessed on a sliding scale.

For a single person, your Age Pension will reduce by 50 cents for each dollar over $226. For couples it will reduce by 25 cents for each dollar over $396.

It means that the more you earn, the lower your Age Pension payment will be, until it reaches zero.

What are the rules for the Age Pension asset test?

In order to receive the full Age Pension, from the 1st of July, single homeowners can own assets (including superannuation) up to a value of $333,000. For non-homeowners, this will be up to $600,000.

But a couple has a different threshold, and it’s not double the amount of one person. From the 1st of July, a couple combined can own up to $499,000 in total if they own a property, or $766,000 if they don’t.

But like the income test, it’s also possible to get a part-payment if you’re over those thresholds.

From the 1st of July, if your assets are less than $733,500 if you’re a single homeowner, and $1,000,500 if you’re a non-homeowner, you are still entitled to some level of payment.

Couples are also entitled to a part-payment so long as their combined assets aren’t more than $1,102,500 for homeowners. Non-homeowners can own assets totalling up to $1,369,500.

The post Does my superannuation affect my Age Pension eligibility? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.