How Much Money Can I Have In The Bank And Still Get The Pension?

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During the phase of retirement, one of the most commonly asked questions is “How much money can I have in the bank and still get the pension?” Here we will be informing you the rules regarding the age pension income tests and the age pension assets tests. These rules regulate your eligibility for age pension as well as the rates applied to any kind of savings in your bank account.

At first, it is important that you pass the Age Pension Income Tests, have reached your Eligibility Age and satisfy Australian Residency Rules.

Statistics show that more retirees pass the age pension assets tests but not the age pension income tests. The Centre of Excellence in Population Ageing Research (CEPAR) suggests that only one-third of Australians who receive part pensions have too many assets to be eligible for a full pension. The other two-thirds being ineligible to receive the full pension as their income are too much. It also announced that 54% of full pensioners have assets worth below $50,000.

Hence, the pension assets are tested and the amount of pension you are expected to receive can be affected; in case your overall savings exceed the standards set by the Department of Human Services. It results in the same situation if you receive extra income from any kind of source.

How Does The Age Pension Assets Tests Work?

Your eligibility to be qualified for an age pension and the rate of the amount that you will be paid is decided by assessing these age pension assets tests. The fortnightly age pension payment is reduced by $3 for every $1000 that exceeds the asset limit. 

The market value of all the assets you own is evaluated by the Department of Human Services via Centrelink to decide your possible eligibility for the age pension. Any other debt against the evaluated assets apart from your home is deducted from their market value for the determination of assets test.

To view more of the detailed definitions of assets by Centrelink you can visit servicesaustralia.gov.au.

Age Pension Assets Test 2020

The asset limits for full age pensions are reviewed each year based on the Consumer Price Index (CPI), on the 1st of July and the limits for part age pensions are reviewed in March, July and September of each passing year. The assets test limits for 2020 are in the list below:

Assets limits for a full Age Pension 2020

SituationLimit
(1 July 2020 to 30 June 2021)
Previous Limit
(1 July 2019 to 30 June 2020)
Increase
SingleHomeowner$268,000$263,250$4,750
SingleNon-homeowner$482,500$473,750$8,750
Couple (combined)Homeowner$401,500$394,500$7,000
Couple (combined)Non-homeowner$616,000$605,000$11,000
Source: Department of Human Services

In case the value of your assets exceeds the limits in the above table of Full Age Pension, you can still be eligible for a Part Age Pension. The table below lists the maximum amount of assets you can own to be eligible to receive a part pension payment.

Assets limits for a part Age Pension 2020

SituationLimit
(1 July 2020 to 19 September 2020)
Previous limit
(20 March 2020 to 30 June 2020)
Increase
SingleHomeowner$583,000$578,250$4,750
SingleNon-homeowner$797,500$788,750$8,750
Couple (combined)Homeowner$876,500$869,500$7,000
Couple (combined)Non-homeowner$1,091,000$1,080,000$11,000
Couple (illness-separated, combined)Homeowner$1,031,500$1,024,500$7,000
Couple (illness-separated, combined)Non-homeowner$1,246,000$1,235,000$11,000
Source: Department of Human Services

What Are The Materials Included In The Age Pension Assets Test?

A list of some assets that you or your partner may own that will be considered in the assets test list:

  • Real Estate assets excluding your family home. For e.g. investment property or any other property that you may own. 
  • House old contents you may own. For e.g. furniture and appliances.
  • Superannuation balances.
  • Income streams.
  • Funeral investments depending on the value.
  • Financial investments. For e.g. surrender value of life insurance insurances and term deposits.
  • Retirement village contributions.
  • Motor vehicles, boats and caravans.
  • Jewellery.
  • Assets or money gifted to someone.
  • Cryptocurrencies.

How Does The Age Pension Income Test Work?

You are still allowed to receive a certain amount of income and receive an Age Pension. This income can be derived from various means such as salary, investments, etc.

In case your income exceeds the limit set by the Department of Human Services, 50 cents will be deducted for every exceeding $1. This deduction will be conducted until you reach the disqualification limit for a Part Age Pension, ceasing your Age Pension Payment.

Age Pension Income Test 2020

The asset limits for full age pensions are reviewed each year based on the Consumer Price Index (CPI), on the 1st of July and the limits for part age pensions are reviewed in March, July and September of each passing year. The income limits for 2020 are in the list below:

Pension Disqualifying Income Limits 2020

SituationFor full pension/allowance (per fortnight)For part pension(pf)
Singleup to $178less than $2066.60
Couple (combined)up to $316less than $3163.20
Illness separated (couple combined)up to $316less than $4093.20
Source: Department of Human Services

What Are The Materials Included In The Age Pension Income Test?

Centrelink assesses different forms of income for the purpose of Age Pension. These may include:

  • Gross employment income. For e.g. salary including bonus
  • Deemed income from financial investments. For e.g. shares, managed funds, bank accounts.
  • Deemed income from superannuation if you have reached the pension age.
  • Distributions and dividends from private trusts and private companies.
  • Income from outside Australia
  • Gross business income less allowable deductions
  • Part or all of pension and annuity payments.
  • Net rental income.
  • Jewellery.

What are the Centrelink Deeming Rates?

The Centrelink has a set of rules known as deeming, which is used to work out the income from your financial assets. It considers the assets to earn a set rate of income, regardless of what they really earn. The Centrelink deeming rates and threshold of 1st July 2020 are listed below:

Centrelink Deeming Rates And Threshold 2020

Family SituationAssets ThresholdRate of Deemed Income
Single$0 – $53,0000.25%
Above $53,0002.25%
Allowee Couple – per person (1)$0 – $44,0000.25%
Above $44,0002.25%
Pensioner Couple – combined (2)$0 – $88,0000.25%
Above $88,0002.25%
Source: Department of Human Services

Centrelink deeming rates are set by the Minister for Social Services and are monitored regularly to make sure they reflect returns on a wide range of investments available in the market. They can be raised or lowered depending on the average market returns and to reflect the interest rates set by the Reserve Bank of Australia.

Most of the Australians relying largely on the Age Pension believe that the deeming rates are unfair. This conclusion was reached over the fact that actual returns on savings accounts and term deposits are often lower than the Centrelink deeming rates. This means that they are deemed to be earning more income from their savings than they actually are and hence, their Age Pension payment is reduced.

In case you don’t receive an Age Pension, Centrelink deeming rates may still be applied to your financial investments to ascertain the income and your eligibility for a Commonwealth Seniors Health Card.

Under these circumstances, you may be excluded from Centrelink deeming rates.

  • Upon the failure of a financial investment
  • Fully preserved or inaccessible superannuation investments

How Does The Age Pension Assets And Income Tests Work Together?

Reaching the threshold limits in both the age pension assets tests and the age pension income tests, the pension will be based on the lower amount.

For e.g. suppose you are eligible for $400 per fortnight according to the assets test and $300 per fortnight under the income test, the lower amount aka $300 per fortnight test will be applied.

Hardship Provisions

In case you are suffering from an unfortunate financial hardship resulting in the value of assets is preventing you from receiving any Age Pension or a reduction in the amount, you are allowed to apply to Centrelink to review your eligibility.

The criteria that will be used by Centrelink while assessing your claim include:

  • Owned assets that are difficult to sell
  • No borrowing against the asset’s value
  • Your qualification for the Age Pension under the income test
  • Proof of total income is less than the Full Age Pension rate
  • If there’s any way you can improve your financial circumstances

You must let Centrelink know the changes in circumstances within 14 days. For example, if you move house, start working or your assets increase or decrease in value. This can be done in a number of ways.

The details can be updated without having to visit your local Centrelink Service Centre with the help of the Express Plus Centrelink mobile app, calling the Centrelink phone self-service or via online myGov account.

Bottom Line

To pass the age pension income tests and the age pension assets tests, you must first be eligible for a full age pension or part age pension. The value of all your assets excluding your family home should be lower than the threshold limits.

That was all about our topic on “How Much Money Can I Have In The Bank And Still Get The Pension?

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