If you are nearing retirement and you are in a relationship, talking about pension is important because it can help you plan ahead and avoid potential financial stress or conflicts in the future.
Pension is a major source of retirement income and it’s important for you and your partner to have a clear understanding of your entitlements.
Here are six things that every couple should know about the Australian pension:
1. You must both pass income and assets test
Couples must pass both income and assets tests to receive the pension. The income test assesses both partners’ income together. If your combined income exceeds the income test threshold, your pension payment will be reduced or may be completely cut off.
On the other hand, the assets test takes into account the value of all assets that you and your partner own (excluding your owner occupied family home) such as car, investments, secondary property and superannuation. If your combined assets exceed the assets test threshold, your pension payment may be reduced or may be completely cut off.
2. You need to live together
To be eligible for the Age Pension, you and your partner must have reached the Age Pension age. The Age Pension age is currently 66 years old, but it will gradually increase to 67 years old by 2023.
And don’t forget that couples must be in a committed relationship and live together. The pension considers both partners’ income and assets when determining eligibility and payment rates.
3. Payment rates may vary depending on your circumstances as a couple
The base rate for the Age Pension for couples is currently $710.80 per fortnight for each partner. This rate is adjusted every six months in March and September based on the consumer price index.
But take note that pension payment for couples is determined by a means test that takes into account both partners’ income. The more income you and your partner have, the lower your pension payment will be. If your combined income exceeds a certain threshold, you may not be eligible for the pension.
The assets test also affects the pension payment for couples. The value of all assets that you and your partner own is taken into account (excluding your home) such as car, investments, and superannuation. The more assets you and your partner have, the lower your pension payment will be. If your combined assets exceed a certain threshold, you may not be eligible for the pension.
IMPORTANT: Payment rates and eligibility criteria for the Age Pension may change over time, so it’s important to stay up to date with the latest information from the Australian Government’s Department of Human Services.
4. Work out how much you need for retirement
The amount of money you need to live a comfortable retirement in Australia will vary depending on your lifestyle, location, and other factors.
According to the Association of Superannuation Funds of Australia (ASFA), a couple aged around 65 years would need a lump sum of around $640,000 in addition to the Age Pension to support a comfortable retirement, while a single person would need around $545,000.
ASFA’s definition of a comfortable retirement includes a range of lifestyle factors, such as owning a car, regularly eating out, and taking regular domestic and overseas holidays. It also takes into account expenses such as healthcare, home repairs and maintenance, and utility bills.
[Related Article: Seniors Finance: Five ways to get rid of debt before retirement ]
5. Understand how your superannuation affect your retirement savings
Superannuation rules for couples in retirement in Australia can be complex, so it’s important to have a good understanding of the regulations and requirements to make the most of your retirement savings.
Remember, superannuation is an individual investment, meaning each partner in a couple has their own super account. This means that each partner’s superannuation balance and investment strategy can be different, and they are not shared between partners.
One way that couples can boost their superannuation balance is by making spouse contributions. This involves making contributions to your partner’s superannuation account from your own income. If your partner earns less than $40,000 per year, you may be eligible for a tax offset of up to $540 for the contributions you make.
6. You may be eligible for supplemental entitlements as a couple
In addition to the Age Pension and superannuation, there are several other government entitlements and benefits that couples may be eligible for during retirement in Australia. Here are a few examples:
- Commonwealth Seniors Health Card: This card provides access to cheaper prescription medicines, bulk-billed doctor visits, and other concessions for eligible retirees who do not receive a pension.
- Pensioner Concession Card: This card provides access to discounts on a range of goods and services, including public transport, energy bills, and council rates. It is available to those who receive a pension, including the Age Pension and other government payments.
- Home Care Packages: Home Care Packages provide funding for in-home support and care services for eligible retirees, allowing them to remain in their own homes for longer.
- Carer Payment: This payment is available to people who provide ongoing care and support to a person with a disability, illness, or frailty.
- Rent Assistance: This payment provides financial assistance to eligible retirees who rent their home and are receiving certain government payments, including the Age Pension.
- Energy Supplement: This payment provides additional support to eligible retirees to help cover the cost of energy bills.
Reverse Mortgages are loans for pensioners and retirees designed specifically for older borrowers who are typical ‘asset rich’ but ‘cash poor’.
Known variously as ‘senior’s loans’, ‘reverse home loans’, and ‘senior’s finance’, Reverse Mortgages are the most popular form of home equity release in Australia.
Reverse Mortgages allow people from the age of 60 to convert the equity in their property into cash for any worthwhile purpose. No income is required to qualify.
Although interest is charged like any loan, the borrower is not required to make repayments (although they can usually make voluntary payments if they wish).
For couples, the debt (including all interest and fees owed) is repaid to the lender when the last surviving borrower dies.
For more information about Seniors First Reverse Mortgage, call us on 1300 745 745 or CLICK HERE to chat with a licensed broker.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial advisor before you make any decision.