Age Pension when one partner is eligible

Retirement planning for a couple with a big age difference is so much more complicated and a lot more details need to be taken into account, and today we will discuss one of those main problems when one partner reaches the Age Pension age, and the other is still too young.

How does Centrelink calculate the Age Pension payment in the situation when only one partner is eligible?

1. Age Pension Rate

First thing is first, you are still a couple, regardless whether one or both of you are of Age Pension age, therefore Centrelink will treat you as a couple for the purpose of the Age Pension rate. So you will receive the couple rate, with only one person being paid and not the rate of payment for a single person.

So what is the difference in payments then?

The maximum rate for a couple is $744.40pf per person, so if one person is eligible, this would be the maximum you could receive.

The maximum single rate is $987.60pf, therefore the single rate payment is currently $243.20 higher.

Both levels of payments are applicable from 20 March 2022 till 10 September 2022 and include the pension supplement as well as energy supplement.

2. Which assets are included in Income and Assets Test for one partner, therefore what are assessable assets?

The Income and Assets Tests are no different whether one or both partners are applying. Therefore, all assets are included in both tests regardless of the legal ownership. If a property, shares, money in bank accounts or any other assets are in the younger spouse’s name, they all will be included in Income and Assets Tests for the partner who is of Age Pension age and is applying for Age Pension.

3. Which assets are excluded from Age Pension tests?

Family home – in most situations home is excluded from Centrelink tests for the purpose of calculating your Age Pension eligibility regardless whether one or both partners are applying and regardless whose name is on the title of the property.

Younger spouse super – this is a huge benefit for Age Pension eligibility in the situation of a couple when only one reached the Age Pension age.

So if there is a big age gap between partners, all the money sitting the in the super fund of the younger spouse is not counted and is fully exempt from Age Pension Income and Assets Test when Centrelink calculates eligibility of the older partner.

But you still need to disclose it to the Centrelink office on Age Pension application. Remember though, once you move any of that super money to any type of an income stream, it is no longer exempt and will affect the Age Pension payment rate for the older partner.

This is how you can improve the Age Pension for the eligible partner, the trick however is to balance the Age Pension payment and your cashflow needs. After all, even if you receive the full Age Pension as one member of the couple, the total pension payment will only be $19,354 for a year, that is not enough for any couple to survive in Australia.

Therefore, you need to calculate well what is the total income you need in retirement and how much of it can be received from Centrelink office and how much is to come from your own sources.

So let’s now look at this example:

Gael and Stan

Gael is 59 and Stan is 67. They live in the house that legally belongs to Gael, as she bought it long before she met Stan 10 years ago, and they’ve been married for 5 out of those 10 years.

Stan retired from employment, while Gael wants to continue working as she loves her job and earns a good level of income.

They have a holiday house that is owned jointly, each member of the couple has their own car and each has a superannuation fund account.

So what income and assets will Centrelink calculate for Stan’s Age Pension?

Family home – although the family home belongs to Gael, is on her name and was purchased long before Gael and Stan became a couple, Centrelink will see the home as their family home of both partners and it will be exempt from Income and Assets Test.

Cars – Gael and Stan have one car each, but Centrelink will calculate both cars under Assets Tests, regardless of the fact that one of those cars belongs to Gael who is not of Age Pension age, therefore not eligible for the Age Pension payment.

Holiday house – although the ownership is 50/50, and half belongs to Gael, who is not eligible for Age Pension and is not applying, Centrelink will count the full value of the property under the Assets Test, when calculating Stan’s eligibility.

Gael’s super – the super balance will be exempt from Income and Assets Test until Gael reaches the Age Pension age or she commences an income stream.

Stan’s super – unlike the common believe that super is not counted for Age Pension, this is incorrect. Stan has reached his Age Pension age, therefore for Centrelink it makes no difference whether he keeps money in super or moves it to an income stream, the full balance is calculated under Income and Assets Tests. So it makes sense for Stan to rollover his super to an income stream not to pay the superannuation tax any longer and to have an additional income to supplement the Age Pension payments.

Gael’s income – as mentioned before, although Gael is not eligible for Age Pension, her income will be counted under the Income Test for the purpose of calculating Age Pension eligibility by Stan. Therefore, the higher Gael’s income, the lower the Age Pension received by Stan.

So I repeat again, the whole point of a good retirement planning in this situation is to find a good balance between the level of income that you require for the lifestyle you wish to have and the Age Pension that you could receive.

There are ways to maximise your Age Pension eligibility, the question is how much needs to be sacrificed?

Do you need to reduce your income from work that you might be enjoying like Gael? Do you want to do this? Or another way to look at it is, do I want to keep on working so many hours if all I am doing is reducing my partner’s Age Pension payments?

How much money do we hide, and by doing so, how much is our lifestyle being sacrificed? Is that what we want?

How much will we need to spend to supplement Age Pension? How much can we keep on saving? Will our money last us the lifetime?

All those are very important questions and often without some solid planning, impossible to answer. Sorry to say that, but most people are just guessing and hoping for good market returns year after year, which is not always the case and that’s where a good financial advice can add an incredible value to your financial set up, level of income, structure of assets, Age Pension payments, longevity of your savings and your income. 

Retirement is a Journey not a Destination, so be well prepared for the Ride

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement