Pension boost for seniors willing to work, but know the traps

Labour shortages across Australia have created job opportunities for everyone, but age pension recipients must tread carefully.

Retirees’ costs are rising fast and many seniors do not realise they can earn hundreds of dollars a fortnight from part-time work without affecting their pension.

The government’s Work Bonus scheme allows older Australians to receive $300 a fortnight from employment that doesn’t count towards Centrelink’s pension income test.

The income test itself allows $180 of fortnightly income before pensions reduce by 50c for each extra dollar received, so a retired pensioner couple who both work a bit can receive almost $24,000 a year combined and still potentially get a full age pension.

It costs $64,771 a year for a couple to retire comfortably, and $45,962 for a single, according to new data from the Association of Superannuation Funds of Australia. It found retiree costs climbed 3.9 per cent last year.

And while the Work Bonus can help, it’s come under recent criticism for not being generous enough to seniors who want to work more to help Australia’s labour shortages but don’t want to decimate their pension.

Senior pensioners need to crunch their numbers before heading back into the workforce.

Later Life Advice founder Brendan Ryan says once you reach pension age – currently 66.5 – excess work can affect pension eligibility where “every dollar people earn they lose 50c of pension”.

“So it’s effectively a 50 per cent tax rate,” he says.

“The people who are impacted the most are the people who have smaller amounts of savings.”

Mr Ryan says these pensioners are often not clients of financial planners, so must deal with the “fiddly” calculations themselves, report to Centrelink and know how much they can earn.

National Seniors Australia recently called for more flexibility and says our workforce participation of over-65s is below that of other countries including New Zealand, the US and Japan.

“New Zealand pensioners are not penalised for earning additional income through work,” it says.

“Pensioners (in Australia) retiring with limited savings are effectively taxed 50c in the dollar when they work more than one day per week. They need to work but don’t see the point.”

A spokeswoman for Social Services Minster Anne Ruston says it’s not possible to compare NZ’s system with Australia because NZ has no compulsory employer-funded super and no “substantial taxation concessions we have on voluntary superannuation”.

“Services Australia is always available to help age pension recipients access or understand the services that are available to them, including how much income they can earn before it affects their pension,” she says.

Originally published as Pension boost for seniors willing to work, but know the traps