The Government has announced that the Age Pension eligibility age will not go up to 70, as planned. But it is still going up, as is the superannuation preservation age.
The move to take the Age Pension eligibility age up to 67 was legislated by the last Labor Government. The process started in July last year, when Age Pension age went up from 65 to 65 and six months. It is scheduled to go up by six months every two years until 2023, when it will be 67.
The proposal to take Age Pension age up from 67 to 70 was announced in the 2014 Federal Budget. The plan was that from July 2025 the eligibility age would start increasing above 67 until it reached age 70 by July 2035.
The move up to age 70 was included in a bill that was never passed. This means that the decision announced by the Prime Minister last week does not require any legislative amendment.
The move up to age 67 will continue as planned.
The Government also introduced changes to the assets and income tests last year, which have a bearing on Age Pension recipients. Once you get to Age Pension age, the Department of Human Services, will apply a couple of tests to see whether you are entitled to a full or part pension.
Assets test. A single home owner can hold assets worth $258,500 before having the full age pension entitlement reduced. For a single non-home owner, the limit is $465,500.
A home owning couple can hold assets worth $387,500 before having their full age pension entitlement reduced. For a couple who do not own a home the limit is $594,500.
Assets included in the test include superannuation accounts, shares and other financial assets, investment property, business assets, motor vehicles, boats and caravans, collectibles. The family home is exempt.
The Department of Human Services updates these limits in January, March, July and September each year.
For each $1000 of assets over the threshold pension payments are reduced by $3.
Applying this taper rate, a single home-owner’s part pension runs out when asset value reaches $561,250. For a single non-home owner, the part pension runs out when assets reach $768,250.
A home owning couple’s part pension runs out when their asset value reaches $844,000. A non-homeowner couple’s part pension runs out when their assets reach $1.05 million.
Income test. A single person can earn up to $172 a fortnight ($4472 a year) without any reduction in their pension. The pension is reduced by 50 cents for each dollar of earnings over $172. When earnings reach $1987.20 a fortnight the pension cuts out altogether.
A couple can have combined income of up to $304 a fortnight ($7904 a year) without any reduction in pension entitlements. The pension is reduced by 50 cents for each dollar of earnings over $304. When earnings reach $3040.40 a fortnight the pension cuts out altogether.
Preservation age. While the eligibility age for the Age Pension will stop increasing at age 67, the age at which people can get access to their superannuation is still going up
The age at which people can get access to super, under normal circumstances, is called the preservation age. It used to be 55 for everyone but the rules have changed. Here is how it works now:
- If before July 1, 1960 your preservation age is 55.
- If date of birth is between July 1, 1960 and June 30, 1961, your preservation age is 56.
- If date of birth is between July 1, 1961 and June 30, 1962, your preservation age is 57.
- If date of birth is between July 1, 1962 and June 30, 1963, your preservation age is 58.
- If date of birth is between July 1, 1963 and June 30, 1964, your preservation age is 59.
- If date of birth is after July 1, 1964 your preservation age is 60.
There are some circumstances where you can get your super out early but they are very limited and relate mostly to serious medical conditions and severe financial hardship.
To get access to your super you must satisfy what is called a “condition of release”. In addition to reaching the preservation age you need to retire from full time work.
Once you reach age 65 you can take your super, even if you are still working.