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The proper help can be a benefit - age pension

About two-thirds of Australians are entitled to at least a partial age pension (i), so most of us need to understand how it works and determine what role we want it to play in our retirement plan.

   

 

The age pension provides key benefits to retirees. It pays an income stream until death that is adjusted for inflation, providing a bulwark against poverty and higher prices in our later years.

Even though age pension benefits may sometimes be quite small, the fact that they continue until death can help manage the risk that you may live longer than planned for in retirement. For example, a male/female couple both aged 67 today has a 50 per cent chance that at least one of the couple makes it to age 90 and a 5 per cent (1 in 20) chance that one of them makes it to age 99 (ii).

Because the age pension is means tested and personal situations and goals vary so much, this is one of the occasions when it makes sense to consider using a financial advisor to help understand the rules and factor the age pension into your broader retirement financial plan.

To decide how much age pension you are entitled to receive, the government considers your assets and your income. The level of pension received is based on which of those means tests produces the lower benefit.

On a basic level, the lower your assets and income, the more age pension you will be entitled to as its role as a safety net kicks in up to the maximum amount of $843.60 a fortnight for a single pensioner and $635.90 each for a couple, as at March 2019.

A financial advisor experienced in the interaction of the social security and superannuation systems can help you understand how these rules work and in particular the key break points where benefits reduce.

As you can see from this chart, the benefits drop off quite steeply at certain asset levels.

Understanding the impact of wealth on the age pension received

An advisor can also help you make decisions about how these breakpoints interact with your financial goals.

For example, consider the couple at Point A in the chart. If they start drawing down their assets to increase their annual spending or make a one-off purchase, they will also increase their yearly age pension benefit. This might be a wise move for some couples but not for others. Let's say this couple had identified leaving money to their children or setting aside funds for aged care as a financial goal. In those cases, the couple might do best to preserve and possibly grow, rather than spend, their assets, to achieve the goal.

Financial advisors can also guide you through other key considerations, including:

Rules on the treatment of annuities for means testing
Pension loan schemes to increase age pension using home equity
Links between age pension and related benefits, such as the Commonwealth Seniors Health Card
To learn more on the age pension and on creating financial security in retirement, check out our latest research on the topic.

 

i  According to the Australian Institute for Health and Welfare 
ii  "The role of the Age Pension in your Retirement Plan," p. 3.

 

Robin Bowerman
Head of Corporate Affairs at Vanguard.
09 April 2019

 


David Forrest Download David's Adviser Profile

David Forrest

Director
BEc (Acc), MBA, CPA, FFin

David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.

David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.

Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.

David maintains a strong personalised client service focus, providing tailored solutions for clients.

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David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846

Michelle Forrest

Michelle Forrest

Business Finance Manager
B Bus (Acc), CPA

Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.

Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.

With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.

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Darren Chalk Download Darren's Adviser Profile
Natasha Bartlett
Kelly Collins
Jasmine Smith

Jasmine Smith

Client Service Manager

Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.

Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.

Jasmine’s attention to detail, yet gentle approach, means she is able to solve the trickiest of questions for our client community.

Jasmine has gained her Certificate III in Financial Services qualification.

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Merrilyn Smith

Merrilyn Smith

Senior Client Service Manager

Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.

Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.

Merrilyn’s warm and caring nature continues to endear her to our clients and she has already established herself as a valued member of our team.

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