What amount of savings can a pensioner have in the bank?

Learn about having savings, cut-off limits, deeming rules and their effect on the Age Pension.

What amount of savings can a pensioner have in the bank?

How much money can a pensioner have in the bank?
One of the most frequently asked questions for those nearing or in retirement is ‘How much money can you have before it affects your pension?’. This article will look at the rules around the Age Pension income and assets tests, which determine the rate of the Age Pension that you be eligible for, as well as the deeming rates that are applied to any savings you have in the bank.

Passing the assets test is one of the requirements that the Department of Human Services uses to assess your Age Pension eligibility. You must also pass the Age Pension income test, have reached your eligibility age, and satisfy Australian residency rules

The Age Pension assets test is passed by more Australians than the income test. According to the Centre of Excellence in Population Ageing Research (CEPAR), only one-third of Australians receiving part pensions have too many assets to be eligible for the full pension. 

The other two-thirds of part-pensioners are ineligible to receive the full pension because they earn too much income. CEPAR research also reveals that 54 per cent of full pensioners have assessable assets worth below $50,000.

How does the assets test work?
Asset test limits are used to determine whether you qualify for an Age Pension and if so, at which rate it will be paid. Your fortnightly Age Pension payment is reduced by $3 for every $1000 you exceed the asset limit. Once you exceed the limits for a part Age Pension, your Age Pension payment will cease.

Your assets, whether held within or outside of Australia, will normally be assessed at their market value. Any debt owed against the assessed asset will normally be deducted from the calculation.

There are certain assets which are exempt from assessment, such as your main residence if you’re a homeowner, certain pre-paid funeral products and accommodation bonds paid when entering an aged care facility.

You can view what is regarded as an asset by Centrelink, as well as an explanation of what is included in each asset class, and which assets are exempt, at servicesaustralia.gov.au.

You also need to be wary of reducing your assets in order to qualify for an Age Pension, as Centrelink considers this a deprived asset under gifting rules and will assess it as such. The limits for gifting are $10,000 in any financial year, but limited to $30,000 over five years. Deprived assets are assessed for five years.

Asset limits for full Age Pensions are indexed each year on 1 July and the limits for part Age Pensions are indexed in March, July and September of each year. The current asset test limits are listed below.

Centrelink asset test limits for Allowances and full Age Pensions from 1 July 2020

Situation

Homeowners

Non-homeowners

Single

$268,000

$482,500

Couple (combined)

$401,500

$616,000

Illness separated (couple combined)

$401,500

$616,000

One partner eligible (combined assets)

$401,500

$616,000


Centrelink asset test limits for part Age Pensions – effective from 1 July 2020

Situation

Homeowners

Non-homeowners

Single

$583,000

$797,500

Couple (combined)

$876,500

$1,091,000

Illness separated (couple combined)

$1,031,500

$1,246,000

One partner eligible (combined assets)

$876,500

$1,091,000

 How does the income test work?

You can still receive a certain amount of income and receive an Age Pension. This income can be derived from investments, property rental or as a salary from employment, as well as several other means.

Exceeding the fortnightly income limit will see your pension reduced by 50 cents for every $1 over the limit, until you reach the disqualification limit for a part Age Pension, at which point your Age Pension payment will cease.

Limits for the full Age Pension are indexed on 1 July each year and the limits for part Age Pensions are indexed in March, July and September of each year. Details of the current income limits can be found in the table below.

Pension Disqualifying Income Limits from 1 July 2020

Situation

For full pension/allowance (per fortnight)

For part pension(pf) 

Single

up to $178

less than $2066.60

Couple (combined)

up to $316

less than $3163.20

Illness separated (couple combined)

up to $316

less than $4093.20

How is my money in the bank assessed as income?

Centrelink uses a set of rules called deeming to work out the income from your financial assets. It assumes these assets earn a set rate of income, no matter what they really earn.

The current Centrelink deeming rates and thresholds, as of 1 July 2020, are as follows:

Family Situation

Assets Threshold

Rate of Deemed Income

Single

$0 – $53,000

0.25%

Above $53,000

2.25%

Allowee Couple – per person (1)

$0 – $44,000

0.25%

Above $44,000

2.25%

Pensioner Couple – combined (2)

$0 – $88,000

0.25%

Above $88,000

2.25%

 

The income deemed by Centrelink to be received from financial assets is then added to income that you may receive by any other means as part of the income test.

Financial assets to which the Centrelink deeming rate is applied include:

• cash
• term deposits
• accounts at financial institutions, such as banks and credit unions
• friendly society bonds
• managed investments
• loans, debentures and managed investments
• account-based income streams commenced after 1 January 2015
• superannuation and rollover funds assets if over Age Pension age, and held if you are of Age Pension age
• gifts (if invested in income-bearing products)
• securities and listed shares
• unlisted public company shares
• gold, silver or platinum.

Why are Centrelink deeming rates used?
By using Centrelink deeming rates rather than actual returns, the process of assessment is streamlined, with Centrelink able to request less paperwork from customers and ascertain payment rates more quickly. Even if the actual return on investments is greater than the deemed amount, the additional income is not assessed. 

Case study
Paul and Jane are in receipt of the Age Pension and have a combined total of $90,000 in financial assets. This is split between $30,000 in Paul’s savings account, Jane’s term deposit of $20,000 and a jointly held managed investment of $40,000 – all of which pay a different rate of interest.

The total value of financial assets

$90,000

Apply the lower couples threshold of $88,000 and multiply by 0.25%

$220.00

Apply the higher couples threshold to the remainder ($90,000 ­– $88,000 = $2000) and multiply by 2.25%

$45.00

Determine the total deemed income by adding $220.00 + $45.00

$265


This income is added to any other income, such as that from wages, that Paul and Jane earn, and the total is used to determine their Age Pension payment. For every $1 of income that Paul and Jane earn above the relevant threshold, their Age Pension payment will be reduced by 50 cents.

How are Centrelink deeming rates set?
Centrelink deeming rates are set by the Minister for Social Services and are monitored regularly to ensure that they reflect the returns on a wide range of investments available in the market. This means that they can be raised or lowered depending on the average markets returns and to reflect the interest rates (or cash rate) set by the Reserve Bank of Australia (RBA). 

However, although the returns and interest rates are regularly monitored, the reality is that Centrelink deeming rates are not commonly amended. And although they can be amended at any time, to minimise disruption, any changes usually coincide with the indexation of Age Pension payment rates or income and asset thresholds. 

The thresholds are also indexed annually, on 1 July, in line with the consumer price index (CPI).

Does everyone benefit from Centrelink deeming rates?
Many older Australians who rely largely on the Age Pension to fund the majority of their retirement income believe that deeming rates are unfair. This is due to the fact that the actual returns on savings accounts and term deposits are often lower than the Centrelink deeming rates. This means that they are deemed to be earning more income from their savings than they actually are and as a result, their Age Pension payment is reduced.

One way to combat this issue would be to reduce, at the very least, the Centrelink deeming rate that is applied to the lower asset threshold, as it is often those with the least in savings who are most affected. However, it seems unlikely that this will happen any time soon.

If I don't receive an Age Pension, do Centrelink deeming rates matter?
Even if you do not receive an Age Pension, Centrelink deeming rates may still be applied to your financial investments to ascertain your income and therefore your eligibility for a Commonwealth Seniors Health Card (CSHC). 

Self-funded retirees (those whose income falls below the current thresholds, which are indexed on 20 September each year), will receive a CSHC that will provide concessions on prescription medicines, health services, utilities, rates and many other everyday expenses.

Can I be excluded from Centrelink deeming rates?
Under certain circumstances, the Minister for Social Services can grant an exemption to deeming rates and will decide when the exemption will commence. These circumstances are:

• when a financial investment has failed
• certain superannuation investments where funds are fully preserved or inaccessible
• accounts that only contain funds paid to participants for a funded package of support through the National Disability Insurance Scheme
.

Once an exemption from the Centrelink deeming rates has been granted, the actual return on your investments is used to determine your Age Pension eligibility and payment. Deeming exemptions do not apply to the assessable asset value of any financial investment.

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COMMENTS

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Karl Marx
30th Jul 2020
12:49pm
More reason that the current pension system should be replaced with a universal pension for all over 65 years of age. Couples are paid the same rate as singles for simplicity.
All earnings from super, working, shares, credits etc are taxed like everyone else.
ray @ Bondi
30th Jul 2020
8:08pm
the way you have written this it appears all should have a single rate pension, even if there are 2 involved. :)
I take you to mean a couple should have a single pension for each person.
Karl Marx
31st Jul 2020
10:38am
correct, keep the system as simple as possible, less rorting that way. If you have 2 rates a very small minority will still try to rort for a few extra dollars
morrowj1122
30th Jul 2020
1:05pm
Totally agree Mr Marx.
Wake Up
30th Jul 2020
2:58pm
On the Centrelink web site it says if your in receipt of any age pension you must notify them when your financial assets & property assets change in value but it doesn't say by how much. Dose any one know?
Karl Marx
30th Jul 2020
3:39pm
I think it maybe as low as $2,000 but if we did that every time our assets changed then Centrelink would need twice the staff. Thinks are done slow with centrelink.
Universal pension would eliminate this rubbish.
KSS
30th Jul 2020
3:44pm
Any change is a change. What part do you not understand?
Karl Marx
30th Jul 2020
3:48pm
KSS if that was the case then everyone would need to resubmit documents on a weekly basis if not daily lol
Greg
30th Jul 2020
4:22pm
Karl Marx - can't you amend you details online as often as you wish?
Karl Marx
30th Jul 2020
4:33pm
Yes you can Greg but it's the inconvenience factor that stops most otherwise much of your time is spent sending financials etc to centrelink & checking on them to see if they are actually doing anything. Retirement isn't spent checking, dealing etc with government departments when you should be out enjoying life.
As I mentioned above a universal pension would fix this & give OAP more stress free time to enjoy life
panos
30th Jul 2020
4:35pm
What a bloody mess, you need to be a rocket scientist to cope with this rubbish, as usual only those that can afford to hide behind a shifty accountant trusts etc benefit....
Wake Up
30th Jul 2020
6:13pm
Karl Marx If this is true may I ask where you got this information?
Karl Marx
30th Jul 2020
6:33pm
Wake Up. This is an article from YLC dated 2012 but the $2,000 figure is still quoted by many on this forum.
https://www.yourlifechoices.com.au/government/centrelink/centrelink-asset-change-notification
Fedup
30th Jul 2020
7:52pm
If you are on a full pension you only have to notify them if either your income or assets go over the relevant limits.
Taragosun
30th Jul 2020
4:43pm
2.25% they have got to be joking. Just not attainable in this low interest environment.
morrowj1122
30th Jul 2020
6:31pm
Aren't bank accounts a private/personal matter??
Karl Marx
30th Jul 2020
6:35pm
yes they are, centrelink only want to know how much in each account whether you have 1 account or 50.
Briar
30th Jul 2020
6:36pm
Totally agree Karl Marx. In fact this is what National Seniors are suggesting would be the best way to revise pensions in Australia. NZ has this system and it is easier and cheaper to administer, and so much fairer than the system we currently have, which seems to have just grown and changed ad hoc..... a bit like Topsy!
el
30th Jul 2020
11:11pm
They would have to grandfather the earnings from super being taxed - as we paid a tax on them going in on the understanding that they would not be taxed 'on the way out'. Also some paid after tax payments in addition to Superannuation Guarantee amount paid by employer... so they had been taxed... had they not?
As to singles and each member of a couple being paid the same... expenses are not quite double for the couples of what a single pays eg rent / electricity, gas for heating etc. Rather than single pays more eg rates, power etc... car maintenance etc.
el
30th Jul 2020
11:14pm
PS as I read the form, I was to declare changes in assets etc within 14 days.. so I went back in and did so, after doing this for a while, I was told by a DSS officer at Centrelink not to bother unless the change was over $1000. But I have never had any official advice on the matter from Centrelink.
LFC
31st Jul 2020
9:54am
I got told much the same, not interested in small adjustments to account(s) but anything above $1K "please let us know". I was so anal with it I was updating them for every daily movement in Super....must have driven them mad.
older&wiser
2nd Aug 2020
8:50pm
I too was told similar - to advise of any changes of $1000. That is just ludicrous. Every time I need to pay $1k out, for a house repair, dental work, new fridge. Or even money coming in (a recent syndicate lotto win of $1158) - I find that almost humiliating. If under the income limit, Centrelink have better things to do.
Graeme
3rd Aug 2020
11:13am
I believe that cumulatively, over 30 years or so, that the Government directed financial framework for our Country has deteriorated to the level that it disadvantages retirees generally, but that is particularly so for Self Funded Retirees.

Over say those 30 years the retirement for retirees who marginally exceed the retirement eligibility assets and or income limits are rewarded, for their working life of diligence, with exclusion from any subsidy, and any recognition of their endeavours to be self funded and pay their own way through their life.

I am appalled at the declining culture of my Country. Their are many other significant dismantling of the principles that used to make this Country the envious culture it WAS.

Most amendments are based on PC or radicals initiatives.
Graeme
3rd Aug 2020
11:16am
OK 'their' should have been 'there'
Rooferselgin
6th Aug 2020
7:02am
I appreciate the information being provided in this article. Please provide more information on pensions as it helps me prepare for the future of my company and myself and my family. Thank you.

Dwayne | Roofing Elgin IL


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