Age Pension: how your super is assessed

How does super and the Age Pension affect your retirement income?

Hand with calculator working out superannuation

It may seem surprising that almost 25 years since it was introduced there would still be debate surrounding the purpose of superannuation. However, it is only following a recommendation from the Financial Services Inquiry in March of last year that the definitive objective of superannuation – “provide income in retirement to substitute or supplement the Age Pension” – is being enshrined in law.

How is Age Pension eligibility assessed?
Eligibility for the Age Pension is defined by several factors, including age and residential status. However, possibly the most important factors are the income and asset tests that are applied. When you apply for the Age Pension, Centrelink assesses your claim by applying both the income and asset tests. You will then be paid under the assessment method that results in the lower payment. For example, if your payment would be $540 per fortnight under the asset test but $536 under the income test, then you will be paid in accordance with the rules that apply to the income test.

So, where does super fit into the calculation?
Once you have reached Age Pension eligibility age, your superannuation is assessed under the income and the asset tests. The balance of your superannuation fund, or the amount used to purchase an income stream is assessed as a financial asset and deemed to earn income.

If you have a spouse, their super is assessed under the income and asset tests only once they have reached Age Pension eligibility age or commence the pension phase – where the super fund pays an income stream or pension.

If you have held your account-based pension and qualified for the Age Pension prior to?1 January 2015, then it will not be subject to deeming.

Also, defined benefit income streams are treated slightly different to the standard income streams. For this type of income stream there is a deductible amount, capped at a maximum of 10 per cent, taken from the gross payment. This remaining amount is then assessed under the income test

In order to maximise your income in retirement, it’s important to structure your finances in such a way that you are able to claim at least a part Age Pension. Not only will receiving a part Age Pension mean your super savings last longer, it will also give you access to a Pensioner Concession Card (PCC). Holders of a PCC can access concessions on prescription medicines, rates, car registration, utilities and much more.

By using Moneysmart’s Retirement Calculator you can estimate how much income you will receive from your super and the Age Pension once you retire. And if your calculation indicates that you won't receive an Age Pension, it’s worth bearing in mind that you may qualify for a Commonwealth Seniors Health Card – so it’s still worth making a claim with Centrelink.


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    16th Jan 2017
    Good article - but where can I find the algorithm that would show me if I can even get anything on the pension - maybe an EXCEL spreadsheet or a link to put in your numbers (assets, income, etc.) to check Centrelink. Thanks.
    16th Jan 2017
    LIKE,even centreline staff don't know the answers,they put it into computer and it does it,if the programer does it wrong someone is cheated,us or taxpayer,the system is too complex!!!!!!!!!!!
    16th Jan 2017
    I actually find the calculations on the Centrelink website to be very accurate.
    The Phonse
    16th Jan 2017
    The article says if you have held an account based pension and qualified for the age pension prior to Ist January 2015 then it's not subject to deeming. Is that correct ? ???? Someone please reply.
    16th Jan 2017
    The Phonse... I raise the same question as you have. I had the part pension before 1.1.15, understanding that we were "grandfathered" from future changes, but I'am led to believe that ALL age pensioners are subject to the same rules as from 1.1.17....maybe I am wrong. Does anyone have the answers? Perhaps Debbie McTaggert can answer this query....
    16th Jan 2017
    My understanding of these rules are providing you do NOT change the a/c from say "Balanced to Conservative or Growth|"then the Grandfather remains. Not sure about if you take a "Lump sum"from your a/c. To be on the safe side I just receive the minimum 5% of the a/c each year.
    16th Jan 2017
    Account Based Pensions are grandfathered and not subject to deeming if they commenced before 1/1/15. They are grandfathered for life. The changes to the Asset test on 1/1/17 do not affect these grandfathered rules. Jeffr, I know for sure that taking a lump sum makes no difference except that once out of super and saved in the bank and not spent immediately then it would be subject to deeming. You can't change pension products eg start a new account but changing the investment mix on your existing account is allowed. Just make sure your super fund doesn't close your account and start a new one. I used to work in super and still keep abreast of changes. is also a great website.
    16th Jan 2017
    The Phonse

    Sundays is correct, especially about how Super Guide is a good source.
    Here is a link to help
    16th Jan 2017
    Further to what I said above, I started a part pension from Centrelink several months before 1.1.15, and I also had an account based super pension.
    I was told then that the deeming and Centrelink rules were 'grandfathered' from any future changes.
    Since 1.1.17, I've lost 80% of my part-pension payments from Centrelink, so it seems nothing was 'grandfathered'.
    Abbott and co changed the rules in the 2015 Budget.
    Is it the case that I should not have lost any part age pension as from 1.1.17?
    The Phonse
    16th Jan 2017
    My allocated pension hasn't been 'grandfathered' and I've had it for about 5 years. I haven't changed my super fund so what's going on.I know I can change from 'balance' to say "fixed ' etc as long as I stay with the same fund but I have had my pension reduced since 1st of jan'.
    16th Jan 2017
    part-age pensioners won't put up with these retrospective changes to the Centrelink pension payments which came into force as from 1.1.17. There will be a massive swing against the LNP and they will certainly lose the next election.
    16th Jan 2017
    No contradiction for deeming purposes. Deeming affects income only which means that your account based pension purchased prior to 1/1/15 is not deemed to earn income. However, if you have unfortunately lost some of your pension it is because your assets are above the new thresholds. This would include the value of your super. As the article states, Centrelink assess you for the aged pension on either asset or income whichever gives you a lesser amount. I suggest you get some financial advice
    16th Jan 2017
    The Phonse and Thommo - It was only the deeming that was Grandfathered. That is, with new accounts Clink assume (deem) that you are earning a determined income from the Super Asset. This will affect you if your pension is based on income test. With your accounts they do not do deem the super asset, and presently the policy is that they never will, A Grandfather clause.
    If your age pension has been reduced, then it is probably because of the new asset test rule where there was a $1 per fortnight pension reduction for every $1000 in assets, this has been changed to $3 for every $1000. Your super counts as an asset - it did before this year and still does. There is no Grandfathering to this aspect of super.
    I imagine that a few people will now withdraw some of that asset and spend it to increase their pension. After all you will get $78 per year for every $1000 not in your possession 7.8% is not a bad return for the mattress bank.
    17th Jan 2017
    At least something was worth reading on this site....thanks for the info people ...appreciated.
    18th Jan 2017
    Remember also that defined benefit pensioners were affected from the 1/1/16. Many have pensions being paid from accounts where up to 45% of the super fund was non concessional and therefore was not counted as it had already been taxed at full amounts with no concessions. Centrelink now only assume it was 10%.

    The ATO will have to accept the full amount though that is true.

    I don't understand how figures and assumptions can be just made up to suite the budget problems they have from mismanagement and policies that cost revenue. It shouldn't be allowed.
    16th Jan 2017
    I agree with Fredklaus the system is too complex.
    16th Jan 2017
    A person can have an income stream and still get the full aged pension, simple.
    16th Jan 2017
    The whole system is back to front. The purpose of superannuation should be to minimise the number of people needing a pension. Compulsory superannuation has been in for more than two decades and the percentage of retirees qualifying for a pension continues to rise. The current definition places emphasis on the pension when the Government should encourage people to save for their retirement. However, there will never be confidence in superannuation whilst politicians can change the rules with "the stroke of a pen" as they say.
    16th Jan 2017
    How is it possible to minimise the number of people needing a pension when you make rules that result in those who saved being worse off than those who didn't, reward people who gift generously or spend excessively to qualify for a pension, reward those who overinvest in the family home, and harshly punish those who act responsibly and honestly?

    This government is a disaster and is going to drive the cost of retirement up dramatically with stupid policies, an arrogant elitist attitude, and an apparent desire to wipe out the middle and upper-working class and leave only the rich and privileged and poor folk on ''welfare''. Sadly, it doesn't seem the alternative is much better. Neither major party is putting the national interest first, and most of the minors and independents are lacking both the intellect and the power to drive change.
    16th Jan 2017
    I agree completely Rainey. Those in Parliament will never have to worry personally about these issues. Their very generous superannuation scheme to which they contribute only a small percentage sees them set for life.
    17th Jan 2017
    Time all people paid for their own OAP. The amount of OAP you receive should be a debt upon your estate.

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