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Home / In retirement / Age Pension

Case studies: How is the Age Pension assessed?

September 17, 2020 by Regan Welburn Leave a Comment

Reading time: 7 minutes

On this page

  • How the Age Pension works…
  • How much assets or income can I have before my pension payments reduce?
  • Case Studies

All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Learn more


The rates for a full Age Pension for Australian residents for the period 20 March 2020 to 19 March 2021 are listed below:

  • Single: $944.30 per fortnight (approximately $24,554 per year)
  • Couple (each): $711.80 per fortnight (approximately $18,507 per year)
  • Couple (combined): $1,423.60 per fortnight (approximately $37,014 per year)
  • Couples separated due to illness each receive the Single rate (see above), which combined is $1,888.80 (approximately $49,109 per year)

Note: Annual amounts are estimated by multiplying fortnight amounts by 26. The figures above include the pension and energy supplements.

But not everyone is entitled to the maximum rate of pension…

Australia has a means tested social security system which is designed to work like a safety net. The more in assets or income you have, the less pension you may be entitled to.

If your assets or income exceed the cut off limits, you will not be eligible to a pension at all.

How the Age Pension works…

Centrelink apply the assets test and income test to determine how much pension you are entitled to.

The rate of pension that you will receive is based on which test provides the lower amount of pension.

For example
Maria is a retired single homeowner. She has $255,000 in assets with a deemed income of $180 per fortnight.


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  • Assets tested rate of pension = $909.05 per fortnight
  • Income tested rate of pension = $940.89 per fortnight

Maria’s rate of pension = $909.05 per fortnight (the lower rate is used to determine your payment).

We have case studies at the end of this article which help explain everything in more detail.

How much assets or income can I have before my pension payments reduce?

Firstly it depends on whether you are single or a couple, and secondly, whether you are classed as a homeowner or non-homeowner.

Centrelink has an assets and income free area (threshold) which allows you to have a certain amount of assets and income before your rate of pension reduces.

If both your assets and income are below the asset/income free areas you will be entitled to the maximum rate of pension.

If your assets or income exceeds the free areas (thresholds) but are below the cut off limits then you will be entitled to a part (reduced) rate of pension.

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Assets test

Situation Threshold Cut off limit
Single Homeowner $268,000 $583,000
Non homeowner $482,500 $797,500
Couple Homeowner $401,500 $876,500
Non homeowner $616,000 $1,091,000

Income test

Situation Threshold Cut off limit
Single

$178 per fortnight

(approximately $4,628 per year)

$2,066.60 per fortnight

(approximately $53,732 per year)

Couple

$316 per fortnight

(approximately $8,216 per year)

$3,163.20 per fortnight

(approximately $82,243 per year)

 

How much assets or income can I have before my pension payments stop?

If you fail either one of the income or assets test you will not be entitled to a pension. To fail either test your assets and income would need to exceed the cut off limits listed in the above tables.

If you are not eligible for a pension you may still be entitled to a concession card depending on your circumstances.

Learn more about how the assets test and income test work.

How can I calculate my rate of pension?

To illustrate how the Age Pension rate decreases based on the value of assets and income, below are some examples of the current Age Pension payments that Australians should be eligible for at a range of different asset and income levels, provided that they also meet the other eligibility requirements (age and Australian residency).

Click on the name of each example to view.

Assets test

Example 1 – Single Homeowner
Assets valueAge Pension payment (per fortnight) Age Pension payment (per year) 
$268,000$944.30$24,552
$275,000$923.30$24,006
$300,000$848.30$22,056
$325,000$773.30$20,106
$350,000$698.30$18,156
$375,000$623.30$16,206
$400,000$548.30$14,256
$425,000$473.30$12,306
$450,000$398.30$10,356
$475,000$323.30$8,406
$500,000$248.30$6,456
$525,000$173.30$4,506
$550,000$98.30$2,556
$575,000$23.30$606
Example 2 – Single Non-Homeowner
Assets valueAge Pension payment (per fortnight)Age Pension payment (per year)
$482,500$944.30$24,552
$500,000$891.80$23,187
$525,000$816.80$21,237
$550,000$741.80$19,287
$575,000$666.80$17,337
$600,000$591.80$15,387
$625,000$516.80$13,437
$650,000$441.80$11,487
$675,000$366.80$9,537
$700,000$291.80$7,587
$725,000$216.80$5,637
$750,000$141.80$3,687
$775,000$66.80$1,737
Example 3 – Couple Homeowner (combined)
Assets valueAge Pension payment (per fortnight)Age Pension payment (per year)
$401,500$1,423.60$37,014
$425,000$1,353.10$35,181
$450,000$1,278.10$33,231
$475,000$1,203.10$31,281
$500,000$1,128.10$29,331
$525,000$1,053.10$27,381
$550,000$978.10$25,431
$575,000$903.10$23,481
$600,000$828.10$21,531
$625,000$753.10$19,581
$650,000$678.10$17,631
$675,000$603.10$15,681
$700,000$528.10$13,731
$725,000$453.10$11,781
$750,000$378.10$9,831
$775,000$303.10$7,881
$800,000$228.10$5,931
$825,000$153.10$3,981
$850,000$78.10$2,031
Example 4 – Couple Non-Homeowner (combined)
Assets valueAge Pension payment (per fortnight)Age Pension payment (per year)
$616,000$1,423.60$37,014
$625,000$1,396.60$36,312
$650,000$1,321.60$34,362
$675,000$1,246.60$32,412
$700,000$1,171.60$30,462
$725,000$1,096.60$28,512
$750,000$1,021.60$26,562
$775,000$946.60$24,612
$800,000$871.60$22,662
$825,000$796.60$20,712
$850,000$721.60$18,762
$875,000$646.60$16,812
$900,000$571.60$14,862
$925,000$496.60$12,912
$950,000$421.60$10,962
$975,000$346.60$9,012
$1,000,000$271.60$7,062
$1,025,000$196.60$5,112
$1,050,000$121.60$3,162
$1,075,000$46.60$1,212

Income test

Example 1 – Single
IncomeAge PensionCombined
Per fortnightPer yearPer fortnightPer yearPer fortnightPer year
$178$4,628$944.30$24,552$1,122.30$29,180
$250$6,500$908.30$23,616$1,158.30$30,116
$500$13,000$783.30$20,366$1,283.30$33,366
$750$19,500$658.30$17,116$1,408.30$36,616
$1,000$26,000$533.30$13,866$1,533.30$39,866
$1,250$32,500$408.30$10,616$1,658.30$43,116
$1,500$39,000$283.30$7,366$1,783.30$46,366
$1,750$45,500$158.30$4,116$1,908.30$49,616
$2,000$52,000$33.30$866$2,033.30$52,866
Example 2 – Couple (combined)
IncomeAge PensionCombined
Per fortnightPer yearPer fortnightPer yearPer fortnightPer year
$316$8,216$1,423.60$37,014$1,739.60$45,230
$500$13,000$1,331.60$34,622$1,831.60$47,622
$750$19,500$1,206.60$31,372$1,956.60$50,872
$1,000$26,000$1,081.60$28,122$2,081.60$54,122
$1,250$32,500$956.60$24,872$2,206.60$57,372
$1,500$39,000$831.60$21,622$2,331.60$60,622
$1,750$45,500$706.60$18,372$2,456.60$63,872
$2,000$52,000$581.60$15,122$2,581.60$67,122
$2,250$58,500$456.60$11,872$2,706.60$70,372
$2,500$65,000$331.60$8,622$2,831.60$73,622
$2,750$71,500$206.60$5,372$2,956.60$76,872
$3,000$78,000$81.60$2,122$3,081.60$80,122
Example 3 – Couple (illness-separated, combined)
IncomeAge PensionCombined
Per fortnightPer yearPer fortnightPer yearPer fortnightPer year
$316$8,216$1,888.60$49,104$2,204.60$57,320
$500$13,000$1,796.60$46,712$2,296.60$59,712
$750$19,500$1,671.60$43,462$2,421.60$62,962
$1,000$26,000$1,546.60$40,212$2,546.60$66,212
$1,250$32,500$1,421.60$36,962$2,671.60$69,462
$1,500$39,000$1,296.60$33,712$2,796.60$72,712
$1,750$45,500$1,171.60$30,462$2,921.60$75,962
$2,000$52,000$1,046.60$27,212$3,046.60$79,212
$2,250$58,500$921.60$23,962$3,171.60$82,462
$2,500$65,000$796.60$20,712$3,296.60$85,712
$2,750$71,500$671.60$17,462$3,421.60$88,962
$3,000$78,000$546.60$14,212$3,546.60$92,212
$3,250$84,500$421.60$10,962$3,671.60$95,462
$3,500$91,000$296.60$7,712$3,796.60$98,712
$3,750$97,500$171.60$4,462$3,921.60$101,962
$4,000$104,000$46.60$1,212$4,046.60$105,212

Try our Age Pension calculator to get an indication of your potential Age Pension entitlements.


The Age Pension rate increases twice per year (20th of March and 20th of September) and the income and asset thresholds adjust annually on the 1st of July.

How does deeming work?

The trickiest concept of how an Age Pension is calculated is called deeming.

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Instead of asking pensioners what rate of return is achieved on financial assets (bank accounts, term deposits, shares, superannuation, account-based pensions etc) the Government ‘deems’ these assets to earn a set interest rate (irrespective of the actual rate of return).

The deemed income counts towards the income test.

The balance of the financial assets counts towards the assets test.

The deeming rates and thresholds from 1 July 2020 are listed in the table below.

SituationDeeming lower rateDeeming higher rate
Single0.25% on the first $53,000 of your investment assets, plus2.25% on your investment assets over the amount of $53,000
Couple0.25% on the first $88,000 of your combined investment assets, plus2.25% on your investment assets over the amount of $88,000

Learn more about how deeming works (includes a deeming calculator).

What if my circumstances change?

As your circumstances change (your assets or income increases or reduces) then you may be entitled to more or less pension.

It is extremely important that you advise Centrelink of any changes to your circumstances so that you are paid the correct rate of payment.


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What is my Age Pension age?

The Age Pension has undergone some significant changes in recent times, in part, due to our ageing population and increased life expectancy.

As a result, the Age Pension age has increased and gender discrimination has been removed.

In years gone by, men and women had different age pension ages – they’ve now been brought into line with each other.

What does this mean for me?

The current Age Pension age is 66 years.

The Age Pension age is increasing to 67 over the coming years depending on your date of birth. The next increase is set for January 2020 at which time the pension age will increase to 66.

Date of birthAge Pension ageDate that Age Pension age changes
Born between 1 January 1954 and 30 June 195566 years1 July 2019
Born between 1 July 1955 and 31 December 195666 years and 6 months1 July 2021
Born from 1 January 1957 onwards67 years1 July 2023

Case Studies

To assist in the explanation of how the Age Pension is assessed we have created some case studies.

  • Case Study 1 is a simple explanation of a single homeowner who will receive a part
    Age Pension.
  • Case Study 2 is broken up into two different scenarios. We will look at one of the strategies that can be employed to maximise pension entitlements for couples.

Important: The information in this article is of a general nature only and cannot be considered financial advice.


Case Study 1: Maria

Maria is a single homeowner who has retired from work.

Her assets are as follows:

  • $5,000 in her everyday bank account
  • $55,000 in a term deposit earning 2.5% per year
  • $145,000 in an account based pension where she draws 5% per year income
  • $50,000 in shares paying her 5% per year in dividends
  • A car worth $15,000 and home contents of $5,000
Financial AssetsAmount
Bank Account$5,000
Term Deposit (assumed 2.5% per year interest rate)$55,000
Account Based Pension (drawing 5% per year of account balance)$145,000
Shares (assumed dividends at 5% per year)$50,000
Total Financial Assets$255,000

Note: Maria’s car and home contents are not counted as financial assets

Deemed income

 AssetDeeming rateIncome
$53,000 deemed at 0.25% per year$53,0000.25%$132.50
Residual is deemed at 2.25% per year$203,2002.25%$4,545.00
Total$255,000 $4,677.50

Assets and income test

TypeAssetIncome
Financial Assets (balance and deemed income)$255,000$4,677.50
Car$15,000 
Home contents$5,000 
Total (per year)$275,000$4,677.50
Total (per fortnight) $179.90
  • Assets test: Maria’s rate of pension under the assets test would be $923.30 per fortnight, which is a part pension rate.
    • Maria has $275,000 of assets, which is $7,000 over the $268,000 threshold for Single Homeowners. This reduces her fortnightly pension by $21.00 ($3 for each $1,000 of assets), from $944.30 to $923.30.
  • Income test: Maria’s rate of pension under the income test would be $943.30 per fortnight, which is a part pension rate.
    • Maria earns $199.90 (in deemed income), which is $1.90 over the $178 income threshold for Singles. This reduces her fortnightly pension by $1 (50 cents for each dollar over the threshold), from $944.30 to $943.30.

You are paid the lower rate of the income and assets tests, so the Assets test ($923.20 per fortnight) applies in this scenario.

Cashflow

Age Pension$24,003 per year ($923.20 per fortnight)
Term deposit interest$1,375 per year
Account based pension$7,250 per year
Share dividends$2,500 per year
Total income$35,128 per year

You’ll notice that Centrelink will deem Maria to be earning $4,677.50 per year from her financial assets of $255,000.

Her actual income from the financial investments is $11,125 per year. Centrelink do not assess actual income, they only count the ‘deemed’ income towards the income test.


Case Study 2: Frank and Janet

Part 1

Frank and Janet are married and own their own home.

They have both retired from work, however only Frank (66) is Age Pension age. Janet (60) does not qualify for an Age Pension until she turns 67.

Their assets are as follows:

  • They have $430,000 in the bank earning 2.5% per year interest
  • Frank has $300,000 in an account-based pension drawing $30,000 per year income
  • Janet has $100,000 in her superannuation (exempt until she reaches Age Pension age)
  • They own one car each, worth $10,000 per vehicle
  • Home contents of $10,000
Financial AssetsAmount
Bank Accounts$430,000
Superannuation – Janet ($100,000 – exempt until Age Pension age)$0
Account Based Pension – Frank$300,000
Total Financial Assets$730,000

Note: Frank and Janet’s cars and home contents are not counted as financial assets

Deemed income

 AssetDeeming rateIncome
$88,000 deemed at 0.25% per year$88,0000.25%$220
Residual is deemed at 2.25% per year$642,0002.25%$14,445
Total$730,000 $14,665

Assets and income test

TypeAssetIncome
Financial Assets (balance and deemed income)$730,000$14,665
Cars$20,000 
Home contents$10,000 
Total (per annum)$760,000$14,665
Total (per fortnight) $564.04
  • Assets test: Frank’s rate of pension under the assets test would be $174.05 per fortnight, which is a part pension rate.
    • Frank and his wife have $760,000 of assets, which is $358,500 over the $401,500 threshold for Couple Homeowners. This reduces his fortnightly pension by $537.75 ($3 for each $1,000 of assets, divided by two because Frank is the only member of the couple claiming an Age Pension), from $711.80 to $174.05.
  • Income test: Frank’s rate of pension under the income test would be $649.80 per fortnight, which is a part pension rate.
    • Frank and his wife’s deemed income is $564, which is $248 over the the $316 income threshold for Couples. This reduces his pension by $62.00 (50 cents for each dollar over the threshold, divided by two because he is the only member of the couple claiming an Age Pension), from $711.80 to $649.80.

You are paid the lower rate of the income and assets tests, so the Assets test applies in this scenario.

Cashflow

Age Pension$4,525 per year ($174.05 per fortnight)
Bank interest$10,750 per year
Account based pension$30,000 per year
Total income$45,275 per year

Frank’s rate of Age Pension is reduced significantly due to their large amount of combined assets.

You’ll notice that Janet’s superannuation is not counted towards Frank’s Age Pension.

This presents an opportunity to maximise Frank’s Age Pension if additional funds were invested into Janet’s superannuation which is exempt from assessment until she turns age 67.

Part 2

Frank and Janet receive personal financial advice and the following recommendations were made:

  • Janet to contribute $100,000 from their bank savings into her superannuation as a non-concessional contribution immediately.
  • Janet to contribute $300,000 from their bank savings into her superannuation as a non-concessional contribution utilising the bring-forward provisions in the following financial year

This will effectively remove $400,000 of assets from Frank’s Centrelink assessment until Janet turns Age Pension age.

Financial AssetsAmount
Bank Accounts$30,000
Superannuation – Janet ($100,000 – exempt until Age Pension age)$0
Account Based Pension – Frank$300,000
Total Financial Assets$330,000

Note: Frank and Janet’s cars and home contents are not counted as financial assets

Deemed income

 AssetDeeming rateIncome
$88,000 deemed at 0.25% per year$88,0000.25%$220
Residual is deemed at 2.25% per year$242,0002.25%$5,445
Total$330,000 $5,665

Assets and income test

TypeAssetIncome
Financial Assets (balance and deemed income)$330,000$5,665
Cars$20,000 
Home contents$10,000 
Total (per annum)$350,000$5,665
Total (per fortnight) $217.90
  • Assets test: Frank’s rate of pension under the assets test would be $711.80 per fortnight, which is the maximum rate because he is under the assets test threshold.
  • Income test: Frank’s rate of pension under the income test would be $711.80 per fortnight, which is the maximum rate because he is under the income test threshold.

In this scenario Frank would be paid the full rate of pension.

Cashflow

Age Pension$18,507 per year ($711.80 per fortnight)
Bank interest$750 per year
Account based pension$30,000 per year
Total income$49,257 per year

This strategy has resulted in an increase to Frank’s Age Pension of $14,255 per annum.

They have also increased their overall cashflow by over $4,000 per year.

Another benefit is that because Janet has retired from work, she has attained a ‘condition of release’. This means that she can access ad-hoc lump sums from her superannuation account whenever required.


Very important: Superannuation is only exempt for those below Age Pension age when their account is in the accumulation phase. As soon as superannuation is transferred into an income stream (such as an account-based pension or annuity) then the balance is assessed immediately irrespective of age.

Learn about how super affects the Age Pension.


Note: This case study is designed to illustrate part of a strategy, and is not intended as financial advice. It is also important to consider the investment, tax and other implications of a strategy. Everyone’s financial situation is different and therefore it is vitally important to seek personal financial advice to achieve your own goals and objectives.


Regan Welburn is the director of My Pension Manager, an administration service specialising in Age Pension applications and dealing with Centrelink. Regan previously worked for Centrelink as a Financial Information Service Officer and has an intricate knowledge of the Social Security system.


Want to master the Age Pension rules?

Become a SuperGuide Premium member and access independent expert guidance on topics such as:

  • how much Age Pension you could be eligible for (including our Age Pension calculator)
  • ways you can maximise your Age Pension entitlement
  • how your super affects the Age Pension
  • detailed guides and case studies on applying for the Age Pension, the Commonwealth Seniors Health Card and state seniors cards

SuperGuide Premium also includes performance rankings for 235 super funds and 166 pension funds, more than 500 articles, how-to guides, checklists, tips and strategies, calculators, case studies, quizzes and a monthly newsletter.

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Learn more about the Age Pension in the following SuperGuide articles:

Age Pension rates (March 2020 to March 2021)

September 18, 2020

Age Pension calculator: How much could you be eligible for?

September 18, 2020

Age Pension income test limits (July 2020 to March 2021)

September 18, 2020

Age Pension assets test limits (July 2020 to March 2021)

September 18, 2020

How to maximise your Age Pension

September 17, 2020

Am I eligible for the Age Pension?

September 3, 2020

Deeming rates (and calculator) for the Age Pension income test

July 1, 2020

How does your super affect the Age Pension?

March 1, 2020

What are the Age Pension residency rules?

March 1, 2020

Are you getting your slice of the Age Pension Work Bonus?

November 13, 2019

Retirement age calculator: When can you access your super or the Age Pension?

August 7, 2019

How do I apply for the Age Pension?

July 1, 2019

Related topics

Age Pension In retirement

Related features

Case studies Retirement planning strategies

IMPORTANT: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more

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