Nick Bruining: Centrelink’s new age pension rates give more seniors access to payment for the first time

Another decent increase in the age pension has been announced, with the single rate jumping by nearly $20 a fortnight and a combined $30 for couples.

The new rate will apply from March 20 and has the added benefit of lifting the upper pension cut-off thresholds, which means thousands more seniors may now be eligible for Centrelink payments.

Centrelink income support payments are indexed twice a year — in March and September — and are linked to a variety of measures.

Allowance payments such as JobSeeker and Youth Allowance are tied to the consumer price index.

Pension payments, on the other hand, are tied to CPI but also the pensioner and beneficiary living cost index. Confusing things further, the base pension is also tied to 41.76 per cent of male total average weekly earnings. In essence, whichever goes up by the most in the preceding six-month period is the one that’s used to set the new rate.

This time round, CPI won the race, resulting in the single full rate of payment increasing by $19.60 a fortnight to $1116.30. Couples receive an extra $14.70 each to lift the pension to $841.40 — or a combined $1682.80 a fortnight.

The $841.40-a-fortnight payment might apply if only one member of a couple is eligible, perhaps because of an age difference.

The increases provide a grand annual total of $29,023.80 for singles and a combined $43,752.80 for couples.

While those reliant on the pension will welcome the increase, seniors who may have just missed out on a part-pension because of the means-test system should recheck their position. There’s a chance they might now qualify.

The means-testing system applies an income test and an asset test to determine the amount of pension payable. Whichever test produces the lowest pension payable is the one used. That means you could sail through on one test, but miss out completely on the other.

The income test provides for an income-free area of $204 a fortnight for singles and a combined $360 for couples. Once this level is exceeded, the pension is clipped by 50¢ for each dollar over until it is cancelled altogether.

The effect of a pension rate increase is to lift the amount you can earn in Centrelink-assessable income before you lose the pension altogether.

The upper cut-off for a single after March 20 will be $2436.60 a fortnight — or up to $65,351.60 a year — until you lose the pension altogether under the income test. For couples, this figure will be $3725.60 a fortnight — or $96,865.60 a year.

Under the asset test, assets over the lower thresholds result in the pension being reduced at the rate of $3 per fortnight for every $1000 over.

The cut-off limit for a homeowning single rises by $6500 to $674,000 and for couples, by $9500 to $1,012,500.

Non-homeowner singles and couples are allowed an additional $242,000 in assets.

Remember, the house — no matter how much it is worth — is ignored provided it sits on less than 2ha and is not being used for business purposes.

And even if you just sneak under the thresholds by a whisker, you still get a reasonable fortnightly payment.

The pension is made up of a number of components. There is a base rate, plus combined supplements to cover things like pharmaceuticals, energy and phones.

Under a quirk in the system, these payments are an all-or-nothing arrangement. You don’t get a part supplement like you get a part-pension.

Provided you are under the upper means-test thresholds, the minimum a single person can receive will be $58 a fortnight. For couples, $43.70 each — or a combined $87.40 a fortnight.

The next significant movement is now less than three months away when the lower-means test thresholds changes on July 1.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association