As you near retirement, it's natural to start thinking about how your superannuation and the government Age Pension can work together to optimise your retirement income.
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The Age Pension and superannuation: key differences
First, it’s important to know the difference between the two retirement income sources.
Age Pension - Fortnightly Centrelink payments to retirees who meet age, income and assets test eligibility.
Superannuation - Retirement savings built from employer and personal contributions over the course of a working life. Once you reach retirement age, you can draw an income from your superannuation savings through a Retirement Income account.
Note: You can also take some or all of your super as a lump sum, although a retirement income account may provide tax advantages for you.
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How the Age Pension and superannuation interact
Your superannuation balance plays a major role in determining how much Age Pension you’re entitled to receive.
Centrelink works this out by assessing your superannuation balance and any other assets you have through the Age Pension assets test (which looks at the value of your assets), and the Age Pension income test (which assesses any ongoing income you generate from your investments and other sources, e.g. part-time work).
These two tests determine your eligibility and the amount of Age Pension you can receive.
If you are eligible for the Age Pension, the amount you receive in payments will depend on the value of your superannuation and other assets.
An example of how superannuation can affect the Age Pension
John is single, 68 years old, owns his own home, and is enjoying his retirement. He has $400,000 in superannuation and $50,000 in other assets. Like many retirees, John wants to understand how his superannuation and other assets will affect his Age Pension.
The assets and income tests can be applied to determine if he qualifies for the Age Pension and, if so, how much he would receive fortightly.
Note that Centrelink will only apply one of these tests when determining eligibility - whichever one is higher. Let's take a closer look.
As a single homeowner, John knows that the Centrelink assets test has a threshold of $314,000. Since his combined assets total $450,000, he’s $136,000 over that limit. For every $1,000 over the threshold, the Age Pension reduces by $3, e.g. 136x$3 = $408. This means John's pension is reduced by $408 per fortnight.
With John’s combined assets value of $450,000, the deeming rate of 0.25% applies to the first $62,600, and the rate of 2.25% applies to the remaining $387,400. His deemed income for the first $62,600 is $156.50, and for the remaining $387,400 it’s $8,716.50, for a total deemed income of $8,873 annually. This works out to about $341.27 per fortnight.
The income test allows earnings of $212 per fortnight before reductions apply. For any amount over that, John’s pension is reduced by $0.50 for every dollar. In this instance, $129 x $0.50 = $64.50. Or a reduction of $64.50 per fortnight.
Centrelink applies whichever reduction is greater, so in John's case, the assets test applies. His Age Pension will be reduced by $408, giving him a fortnightly pension of $736.40, assuming all supplements are included.
2024 Age Pension fortnightly payment rates
- Single Australians: $1,144.40 (including supplements)
- Couple (combined): $1,725.20 per couple
- Couple apart due to ill health: $1,144.40 per person
What to consider when balancing your superannuation income with the Age Pension
There are some financial and tax considerations to take into account when drawing down from your superannuation and receiving the Age Pension.
- Lump sum withdrawals and regular income payments from superannuation are not subject to the Age Pension income test and may be tax-free if you’re over age 60. Please refer to our deeming page for more info.
- When planning your income in retirement, you can combine income from your super savings with Age Pension payments (subject to your eligibility for the Age Pension) to meet your lifestyle needs.
- Centrelink’s deeming & threshold rules are regularly adjusted, which can affect the assets and income testing of your superannuation savings and therefore Age Pension eligibility and payments.
Keeping track of any changes is important if you want to make sure you’re not taking too much out of your super or holding too many assets. Careful planning and advice can help you to find the “sweet spot” in combining Age Pension and superannuation payments, to optimise your income in retirement.
Your retirement questions answered
A financial planner can take the guesswork out of retirement. Book a time for an initial conversation and we can help you map out your retirement goals, supporting services, and next steps.
This initial appointment is obligation free and available to all fund members at no additional charge.
Book a time to talk to our advice team or call us on 1800 065 753
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Frequently asked questions
The amount of superannuation you can have and still receive the Age Pension varies, as Centrelink also takes into account other assets when determining your eligibility. If the total value of your super and other assets are within Centrelink’s assets and income test thresholds, you will likely be eligible for the Age Pension. The thresholds change based on whether you are single, part of a couple, and whether you own your home.
Yes, your superannuation balance and any income deemed to have been earned from it are included in Centrelink’s assets and income tests, which determine your Age Pension eligibility and payment.
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