The Age Pension is an Australian Government income support payment available to eligible older Australians who have reached Age Pension age and satisfy residency, income, and assets test requirements.
Administered by Services Australia through Centrelink, the Age Pension is designed to provide a basic level of retirement income for people who meet the eligibility criteria. It forms an important part of Australia’s retirement income system alongside superannuation and private savings.
Some retirees receive the full Age Pension, some receive a part pension, and others do not qualify because their income or assets exceed the relevant limits.
How the Age Pension Works
Unlike superannuation, the Age Pension is not a personal savings account. It is a government-funded payment designed to support eligible Australians in retirement.
To qualify, a person must generally:
- Reach Age Pension age
- Meet Australian residency requirements
- Pass both the income test and assets test
Services Australia assesses both financial tests and applies whichever produces the lower pension entitlement.
Depending on the outcome, a person may receive:
- A full Age Pension
- A part Age Pension
- No Age Pension entitlement
Pension payments generally reduce gradually as assessable income or assets increase and may eventually reduce to zero once the relevant limits are exceeded.
Age Pension Age
Age Pension age is currently 67. Reaching Age Pension age does not automatically qualify someone for payments. Eligibility still depends on residency requirements and the outcome of the income and assets tests.
Because Age Pension rules and thresholds can change over time, eligibility assessments are based on the rules in place when the application or calculation is made.
Age Pension Income Test
The Age Pension income test assesses the income available to support a person in retirement.
Depending on an individual’s circumstances, assessable income may include:
- Employment income
- Investment income
- Superannuation income streams
- Rental income
- Deemed income from financial assets
As assessable income increases, Age Pension payments may reduce and may eventually cease once the relevant thresholds are exceeded.
Age Pension Assets Test
The Age Pension assets test assesses the value of assets owned by an individual or couple.
Assessable assets may include:
- Bank accounts
- Shares
- Managed funds
- Investment properties
- Vehicles
- Household contents
- Certain superannuation interests
The family home is generally exempt from the Age Pension assets test.
Homeowners and non-homeowners are assessed using different thresholds, which can affect eligibility and payment amounts.
What Are Deeming Rates?
Deeming is a method used by Centrelink to estimate income earned from financial assets. Rather than examining the actual return generated by every bank account, share portfolio, or managed fund, Centrelink applies deeming rates to calculate an assumed level of income. This deemed income is then included in the Age Pension income test.
A common misconception is that deeming reflects actual investment performance. In reality, it is simply an administrative method used to calculate assessable income for social security purposes.
Age Pension and Superannuation
The Age Pension and superannuation are often discussed together, but they serve different purposes.
Superannuation is a private retirement savings system funded through employer contributions, personal contributions, and investment earnings. The Age Pension is a government-funded income support payment available to eligible retirees.
Many Australians rely on a combination of superannuation and the Age Pension to fund retirement.
Why the Age Pension Matters
For many Australians, the Age Pension plays a significant role in retirement income planning.
Potential Age Pension entitlement can influence decisions around:
- Retirement timing
- Superannuation drawdowns
- Investment structures
- Part-time work in retirement
- Long-term income planning
A licensed financial adviser operating under an Australian Financial Services Licence (AFSL) may consider Age Pension rules when modelling retirement income strategies. However, eligibility and payment decisions are ultimately determined by Services Australia.
Common Age Pension Misunderstandings
Several misconceptions regularly arise when Australians first research the Age Pension.
One common misunderstanding is that everyone automatically qualifies once they reach Age Pension age. In reality, eligibility also depends on residency requirements and the outcome of the income and assets tests.
Another misconception is that the family home counts towards the assets test. In most circumstances, a principal place of residence is exempt, although other assets may still affect eligibility.
People are also sometimes surprised to learn that Centrelink does not necessarily assess the actual return earned on financial assets. Instead, deeming rates are used to estimate income for Age Pension purposes.
Frequently Asked Questions
What is the Age Pension?
The Age Pension is a government income support payment available to eligible older Australians who meet age, residency, income, and assets test requirements.
Who qualifies for the Age Pension?
Eligibility generally depends on Age Pension age, Australian residency requirements, and the outcome of the income and assets tests.
Does everyone receive the Age Pension?
No. Some Australians receive the full pension, some receive a part pension, and others do not qualify because their income or assets exceed the relevant limits.
What is the difference between the Age Pension and superannuation?
Superannuation is a private retirement savings system, while the Age Pension is a government-funded income support payment.
How do deeming rates affect the Age Pension?
Deeming rates are used to estimate income from financial assets. The resulting deemed income is included when assessing Age Pension eligibility under the income test.
Related glossary terms
Age Pension Asset Test
Age Pension Income Test
Deeming Rates
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