Financial Planning, Retirement Planning

4 Effective Ways to Maximise Your Age Pension for Retirement

May 27, 2022

Retirement is an important goal for many people but financial security in retirement can be a worry.

This is where the age pension can help Australian retirees to fund their golden years.

 

Two million seniors rely on the Age Pension for retirement income, according to the Australian Institute of Health and Welfare. The pension is currently available from age 66.5, but by mid-2023, you’ll need to be aged 67 or over.

 

When it comes to retirement, there are very few things more important than the Age Pension. This is why you’ll want to make sure that you maximise your Age Pension, as it will help you retire comfortably. 

Age Pension payments are based on two tests:

  1. Income Test
  2. Assets Test

Under the income test, single retirees can earn up to $180 per fortnight ($320 for couples) before their pension is impacted. 

Under the assets test, single pensioners who own their own home can hold up to $270,500 in assets to receive the full pension, or up to $599,750 for a part pension. If you are a couple or a non-homeowner, you will have different thresholds.

No matter your situation, restructuring your assets will likely give you the best chance of maximising your Age Pension payments. 

Here are 4 tips to get you started:

 

1. Value Your Personal Assets at Market Value

The Centrelink Assets test doesn’t only consider shares, superannuation and investment properties. It also includes personal items such as:

  • Jewellery 
  • Home contents
  • Vehicles, (including cars, boats, and caravans)

When you are applying for the Age Pension, it is critical to provide accurate information about your assets. However, Centrelink advises to report your assets at market value rather than the price you paid for them.

This can work in your best interest if your goal is to maximise your age pension. The market value of second-hand cars, jewellery and other vehicles might actually be lower than you expect which might help you to maximize your age pension.

To correctly value assets, you could try doing some research on eBay or CarSales to see how much your assets are really worth. 

 

2. Update the Value of Your Assets Regularly

Following on from pricing your assets correctly, it’s also essential to continue updating these asset values. 

Your personal assets will lose value over time. This is especially true for cars, which lose the most value in the first few years. A lower-valued asset could increase the amount you receive from the Age Pension.

Potential boost: Let’s say that the new car you purchased when you first applied for the Age Pension cost $40,000. One year later, the car may be worth just $32,000. Informing Centrelink of the $8,000 drop in value can mean a pension uptick of $24 fortnightly.

 

3. Reduce Your Assessable Assets by Renovating or Upgrading Your Home

You can reduce your assessable assets by renovating your home if you are a homeowner.

While renovating your home or spending money on repairs and maintenance may increase the value of your property, the home you live in is exempt from the assets test. However, by spending this money from your bank account or super fund, it will no longer be considered an asset and may increase your age pension payments. 

 

4. Capitalise on Gifting

Gifting money or assets in retirement to your family and friends may also help you to increase your age pension entitlements.

Gifts can be a way of handing down some wealth to children or grandchildren who want to buy a home or pay for their children’s education. 

In the past, it was more common to pass on money to your children through inheritance. However, nowadays, many parents want to help their children and grandchildren financially while they are still alive. 

While gifts have the potential to reduce your ‘assessable assets’, there are strict rules and timelines that apply to gifting. If you reach the ‘gifting limits’, this may not actually decrease your assessable assets. 

 

Read more about: HOW TO GIFT MONEY TO YOUR FAMILY AND STILL SAVE FOR RETIREMENT

 

Retirement Planning and Centrelink Advice at Cambio Group

We hope this article proves to be useful when it comes to helping you maximise your Age Pension. While this may not seem like a huge difference, maximising your Age Pension allows you to retire comfortably. 

If you’re looking for help with planning your retirement and maximizing your age pension or other Centrelink entitlements, our financial planning team can help. 

Cambio Group offers financial and retirement planning in the Gold Coast. We are dedicated to helping our clients achieve financial freedom and will do everything we can to help them secure their future. 

Need advice on your retirement and Age Pension? Book a call with our team today.

 

 

Disclaimer: The information (including taxation) in this website does not consider your personal circumstances and is of a general nature only – unless otherwise stated. You should not act on the information provided without first obtaining professional advice specific to your circumstances.

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