There was a time when most people would retire on the full Age Pension.

But according to Department of Social Services, only 45 per cent of Australians aged 66 were receiving any Age Pension in 2018. And of those, only 25 per cent were accessing the full Age Pension.

With changes to the asset test for the Age Pension, it has become more important than ever for retirees to examine their circumstances and try to structure their assets and income to maximise any fortnightly payments from Centrelink.

Industry Fund Services (IFS) technical, research and advice services chief Craig Sankey said there were several things you could do to manage your assets and income to help you improve your Age Pension entitlement.

Mr Sankey explained the current Age Pension provides combined $1396.20 fortnight for a couple, and $926.20 a fortnight for a single person. However, whether you get that in full will depend on how much income you receive from other sources, and the value of your assets. Centrelink does both calculations and applies whichever one produces the lower benefit.

Assets test

Centrelink assesses the value of your assets (including superannuation if you are over the Age Pension age), both in Australia and overseas. Your principal place of residence is not counted as an asset, and chattels are assessed at market value, not replacement value. If your assets exceed a certain threshold, your pension payment will be reduced.

Mr Sankey said as a couple who owns their own home can have up to $860,000 in assets and still be eligible for a part pension, while non-homeowners can have just over $1 million in assets and still qualify for a part pension.

Income test

This includes money from employment, pensions/annuities, money deemed to be earned from investments, money earned outside Australia and any money that you salary sacrifice.

Mr Sankey said under the income test, many people believe they are ineligible if they are working at all.

However, under the recently increased Work Bonus scheme, the first $300 of fortnightly income is not counted in the income test. On top of that, they can earn another $308 a fortnight before it starts to affect the age pension.

Centrelink then reduces the Age Pension by 50 cents for every dollar earned over that combined figure of $608 a fortnight.

Tips to help boost part-pension

Mr Sankey said it was important to properly structure assets, particularly for a couple, as “who owns what asset may make a real difference”, Mr Sankey said.

“In a situation where one of the couple is above pension age and the other not, for example, is very important,” Mr Sankey said.

That could mean topping up your spouse’s super while they remain under pension age, as their super isn’t counted towards your combined assets.

Mr Sankey also noted that pensioners are able to gift up to $10,000 a year to family or friends which can also help reduce assessable assets.

If you own your own home, you can make home improvements or do a renovation to both make your home more comfortable and also reduce assessable assets.

Similarly, Mr Sankey said, if you take an overseas holiday, this cost can be deducted from assets.

Prepaying a funeral or buying a funeral bond is another way of reducing assessable assets, merely by bringing forward an inevitable cost.

And in all cases of large expenditure or changes to assets, such as the above, or selling share or drawing down on your super, be sure to let Centrelink know as soon as possible.

While Centrelink only requires an update of your assets once a year, you should advise them within 14 days if making larger withdrawals.

Deeming rates

Centrelink will assess income from investments, such as bank accounts, term deposits and other retirement income, by deeming the return on that money.

Deeming rates are currently at 1.75 per cent on the first $86,200 for a couple, and above that the government assumes an earning rate of 3.25 per cent.

These are the figures used regardless of the actual return on those investments. And with the historically low 1 per cent official cash rate dragging savings and term deposit rates to new lows, Mr Sankey said it was vital for retirees to derive the best return possible on those investments.

Concession cards

Even if you don’t qualify for the Age Pension, you may still be able to get a concession card. For retirees, there are two types of concession cards that provide a range of benefits, including help with the cost of medicines.

• Commonwealth Seniors Health Card – helps with the cost of prescription medicines and other health services if you are of pension age but do not qualify for the Age Pension
• Pensioner Concession Card – entitles pensioners to reduced cost prescription medicines, healthcare concessions and other concessions offered by state and territory governments and local councilsThe New Daily is owned by Industry Super Holdings