Pension Retirement Entitlements - Discover the Two Types of Pensions

Wednesday, March 06, 2024

There are two main types of pensions you may receive in retirement - a Government Age Pension or an Account Based Pension. In many cases you can receive both! Our Maher Digby retirement planning specialists explain your options in this article.

There are two main types of pensions you may receive in retirement:

Government funded Age Pension – provided on a fortnightly basis by the Australian Government. The amount you receive depends on your other sources of income and your assets. Your family home, if you live in it, is not considered an asset. (If you are a veteran in receipt of DVA pension then the rates and limitations are different - view here: DVA Pensions )
Account Based Pension - This is paid from the funds you have accumulated within your superannuation. It can be set up to provide a fortnightly, monthly, quarterly or half yearly income payment arrangement.

The advantage of an account based pension is that when you transfer your superannuation money to a pension, the investment and payments become tax free (once you are over the age of 60). You can always transfer your pension back to superannuation if you go back to work, or if you receive further money that you would like to add to your retirement funds. In this way you can still invest new money in a tax efficient superannuation environment even after retirement. There are rules that apply to adding money to super depending on your age, previous contributions and total value of your superannuation. A specialist retirement financial adviser can assist with working out the details and possibilities for you.

There are many ways to set up your account based pension. Here are some contingencies your retirement planning specialist will consider:

Are you single?
What is your retirement age?
If you are a couple is one of you still working?
If you are a couple how much does your partner have invested?
Is your partner in receipt of an Account Based or Age Pension?
Do you have other funds that may be beneficial to add to your superannuation?
and of course:
What are your current investments and assets?

Depending on answers to these questions and your personal circumstances, there may be ways to arrange your investments that would maximise the Age Pension you qualify to receive.

As at 20^th September 2023, this table below indicates a guide as to what the greatest value of your combined assets can be, before your Age pension may be reduced.

Full Age Pension asset limits

IF YOU'RE:	A HOMEOWNER	NOT A HOMEOWNER
Single	$301,750	$543,750
A couple (combined)	$451,500	$693,500
A couple, with one partner eligible (combined)	$451,500	$693,500

If the value of your assets is above the limits in this table, you may still be eligible for a part Age Pension. There is a gradual reduction in the amount of Age Pension, known as a taper rate, as the total value of your assets increases.

Many self-funded retirees receive a part-pension and the value of this can also be adjusted, according to changes in your circumstances or government rules, as you progress through retirement. How much you are eligible to receive depends on how you/your partner’s monies are invested. This is an area in which your retirement financial adviser can give you guidance and understanding to maximise your position. Of course there is also a cut-off point where you may not be eligible to receive the Government Age Pension.

There are many complexities and choices within pension arrangements in retirement to suit your individual circumstances and needs. Contact Maher Digby Securities, the retirement planning specialists. We can provide comprehensive retirement planning services and investment advice to Sunshine Coast and Wide Bay clients.

For more Information contact Mark Digby at Maher Digby Securities Pty Ltd - Financial Advisers – AFSL No. 230559. This document was prepared without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such. Maher Digby Securities does not accept any responsibility for the opinions, comments, forward looking statements, and analysis contained in this document, all of which are intended to be of a general nature. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend consulting a pension financial adviser.