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Combine the Age Pension with your super savings in retirement
You could be eligible to receive the Age Pension as well as your super in retirement, so it's important to understand how they work together.
The Age Pension is a fortnightly allowance paid to eligible Australian residents by the government. It is distributed by Centrelink and was designed as a 'safety net' for retirees who do not have enough financial resources (such as super) to help fund their retirement.
More than half (3 in 5) of Australians aged over 65 currently rely solely on the Pension (AIHW, 2021).1 Depending how old you are when you decide to retire, your income needs to last you between 15 to 30 years so it's important to understand how the Age Pension works in addition to your super.
There are three main income sources you could rely on once you stop working – superannuation, personal savings and investments, and the Age Pension. Understanding how they work together is necessary to make sure you can live the lifestyle you want in retirement. Different income source combinations, as well as eligibility requirements, can affect the amount of money you receive.
How you decide to access your super in retirement can also affect your Age Pension rate. Your super balance is taken into account by Centrelink when calculating your Age Pension amount and withdrawing a lump sum could affect your payments and have tax implications.
You may be able to increase your Age Pension payments (if eligible) by using some of your super to purchase a Lifetime Pension, because of how it is treated in Centrelink's income and assets tests. Lifetime Pension creates an income for your life or your spouse's life, with money-back protection, so you get at least your purchase price in payments or a death benefit.
In addition, moving your superannuation to a Retirement Income account can turn your savings into an income stream that complements your Age Pension payments while continuing to invest your money. With flexible payment options and a focus on strong long-term investment performance, a Retirement Income account can help you maximise your retirement savings.
If you're eligible to become a QSuper member, find the right combination of QSuper products for you.
There are a number of Age Pension calculators you can use to check what payments and services you may be eligible for.
There are four main requirements you must satisfy in order to start receiving Age Pension payments.
When you can start receiving the Age Pension depends on when you were born:
When you can access your super is different to when you can access the Age Pension.
To receive Age Pension payments, you need to have been an Australian resident for at least 10 years, with no break in residence for five of those years.
There are a few exceptions to this rule, such as refugees or former refugees. You may also be able to claim if you've lived or worked in a country that has a social security arrangement with Australia.
Visit the Centrelink (Services Australia) for more information about residency requirements.
The Australian Government has set limits on the total amount of assets you can own in order to be eligible for the Age Pension. Some of the assets counted in this threshold can include:
If the sum of your total assets exceeds this threshold, your Age Pension amount will decrease by $3.00 for every $1,000 over the limit.3
Use our QSuper Lifetime Pension Income Estimator to see how purchasing a Lifetime Pension might bring you under the assets threshold and potentially increase your Age Pension benefit.
More information about the asset test thresholds.
The Australian Government has also set limits on the total amount of income you can earn on a fortnightly basis in order to be eligible for the Age Pension. Some of the income or deemed income that count towards this threshold can be from:
If the sum of your total income exceeds the Australian Government's limit, your pension payments will reduce progressively and could possibly stop altogether.
Try our QSuper Lifetime Pension Income Estimator to see how purchasing a Lifetime Pension might bring you under the income limit and potentially increase your Age Pension benefit.
More information about the income test thresholds.
There are other benefits available for retirees. Some of these include:
When it comes to making the most out of your retirement, getting professional guidance can help.
Talk with us about your options for retiring with QSuper.
1. Australian Government, Social Security Guide: 4.2.3 Pensions & benefits assets tests. Accessed 4 February 2020.