Many people we come in contact with will have an idea in the back of their mind that they will be eligible for the Age Pension. So, how realistic are their expectations and what level of pension will they end up with once they become eligible?
The Age Pension is subject to 2 tests: an Assets Test and an Income Test.
These tests simply mean that, once the person or couple moves beyond a certain level of assets or income generated outside of the pension from assets that fall within certain definitions, then the Age Pension starts to fall and eventually cuts out.
According to the SuperGuide website, the current Age Pension rates are: for a single person, $907.60 per fortnight and for a couple $1,368.20 per fn. That’s the equivalent of $23.597.60 pa for the single and $35,573.20pa for the couple.
Now, the government site (ASIC) estimates that for a couple to live comfortably in retirement they will need $60,063 pa and a single person will need $43,695 pa – all figures after tax – so the Age Pension falls far short of that. ASIC therefore estimates the lump sum needed to support a comfortable lifestyle for a couple is $640,000 (or $545,000 for a single person) assuming a partial Age Pension. Read more here.
In our next newsletter we’ll look at how much the Age Pension is affected by both Assets and Income but, of course, if you want any specific advice on matters concerning the pension, you’ll need to speak with your licensed financial adviser.