The Australian Age Pension is a fundamental part of Australia’s social security system. It acts as a safety net for seniors with few resources and supplements the income of seniors with more resources. To receive an Age Pension, a person must satisfy age, residence and means tests.
Key features of the payment are:
- It is a non-contributory, flat-rate (not related to former earnings), means tested payment.
- It is funded by current taxpayers and not through accumulated individual contributions i.e. it is not related to previous income.
Australia’s retirement income system
The basic objective of Australia’s retirement income system is to support and encourage people to save for retirement while ensuring older Australians with limited opportunities for self-provision have an acceptable standard of living. The Australian retirement income system is based on three parts or pillars:
- a means tested, publicly funded Age Pension;
- compulsory superannuation through the Superannuation Guarantee; and
- voluntary savings through additional superannuation contributions, supported by tax concessions, and other private savings.
Most senior Australians’ retirement incomes combine two or three of the above components, with the Age Pension the main component for many people.
Qualification
The Age Pension is available to all Australians who meet the residence and age criteria, and have private income and assets below the relevant means test limits.
Age Pension Age
Age Pension Age for men is currently 65 years and for women 64.5 years (rising to 65 years on 1 July 2013). The general qualifying age for the Age Pension will increase from 65 in 2017 to 67 by 2023.
Residence
A person must reside in Australia at the time they make their claim and have at least 10 years of continuous residence (5 continuous years if the total residence period exceeds 10 years).
Means Test
The Age Pension is a targeted payment. Social security income and assets tests (means test) are applied and the test that results in the lower rate of payment is used to calculate a person’s entitlement.
Work Bonus
The Work Bonus is a fortnightly income test concession for pensioners of pension age who wish to work. It allows pensioners to keep more of their pension by excluding the first $250 of fortnightly employment income from assessment. Unused amounts of the concession can be accrued up to a maximum of $6,500 to offset future employment income.
Retirement Age
The Age Pension age is not an official retirement age. There is no general, official retirement age in Australia.
Rates and Payment
The rate of pension is made up of the base rate of pension and the Pension Supplement.
The maximum single rate of pension is set at 66.33 per cent of the maximum couple combined rate of pension.
Maximum rates at 20 March 2013:
- Single rate = $21,018.40 a year
- Couple combined rate = $31,688.80 a year.
Pension rates are adjusted twice yearly in March and September to maintain their value. They are indexed by the higher of the movement in the Consumer Price Index and the Pensioner and Beneficiary Living Cost Index. The couple combined base rate of pension is then compared to a wages benchmark, 41.76 per cent of Male Total Average Weekly Earnings, and topped up to equal it if necessary. The single base rate of pension is set at 66.33 per cent of the couple combined rate.
The Age Pension is generally paid fortnightly into pensioners’ bank accounts by the Australian Government service delivery agency, the Department of Human Services.
The pension is payable overseas. This can be ongoing indefinitely if the pension begins before the person leaves the country. The pension may be reduced after 26 weeks, based on the proportion of a person’s working life in Australia.
The Age Pension is taxable; however, due to tax rebates available to older Australians, most age pensioners pay little, if any, tax.
Assistance available to age pensioners
In addition to the Age Pension, the following assistance is available to age pensioners:
- Advances on pension payments to assist pensioners to budget;
- Subsidised health care;
- Subsidised prescription medicines through the Pharmaceutical Benefits Scheme;
- Assistance for people who rent, through Commonwealth Rent Assistance;
- Concessions to pensioners from state and territory governments, with some financial support from the Commonwealth Government, including concessions on rates for home owners, utilities (such as electricity and water), public transport and motor registration fees;
- Assistance for people in remote areas through an additional allowance;
- Subsidised aged care.
All Australian residents, including age pensioners, have universal health care coverage through the publicly funded Medicare program.
Additional assistance is available through Department of Human Services’ social workers, who provide information or refer customers to community support services. The Department’s Financial Information Service can help anyone in the community, including age pensioners, to make informed decisions about investment and financial issues to maximise their retirement incomes.
Key statistics (June 2012)
- 69 per cent of the population of pension age were in receipt of full or part‑rate Age Pension.
- 8 per cent received other income support payments, such as veterans’ service pensions, instead of the Age Pension.
- 9 per cent did not qualify for an Age Pension because of assets or income levels, but had a Commonwealth Seniors Health Card. The card entitles cardholders to medical and pharmaceutical concessions, some transport concessions and a Seniors Supplement payment to help with household expenses.
- The remaining 14 per cent were fully self‑funded retirees.
Expenditure:
Government spending on the Age Pension
- 2012-13: AUD 36.6 billion (est)
- 2011-12: AUD 34.7 billion
- Age Pension expenditure for 2011-12 represents around 2.3 per cent of GDP.
Pension Reform
In 2009, the Government introduced the most significant reforms to the pension system in its 100‑year history. The base rate of pension was substantially increased and indexation arrangements were improved to better reflect changes to pensioners’ costs of living.
Legislation
The Social Security Act 1991 and the Social Security (Administration) Act 1999 govern Australian social security income support payments, concessions and allowances, including the Age Pension.
Review
Recipients of social security income support payments have the right to appeal decisions through the following institutions:
- Department of Human Services (government service delivery agency);
- Social Security Appeals Tribunal;
- Administrative Appeals Tribunal;
- Federal Court;
- High Court.
Information
The Australian Government produces a range of publications with information about social security support, including the Age Pension. Publications and fact sheets are available in hard copy and at the following internet websites:
http://www.humanservices.gov.au
[1] Annual Report 2011-12
[2] Annual Report 2011-12