Bigger pensions could flow from changes to Work Bonus for seniors

Senior Australians who work could get bigger pension payments from January 1 after new laws passed through parliament.

Seniors seeking part-time work to help combat the cost-of-living crisis will be able to earn more and keep more age pension following new changes to legislation.

More generous incentives under the Work Bonus scheme – which effectively allows pensioners to earn up to $504 each fortnight without losing any government payments – will kick in from January 1.

The changes, which will cost the government $42m over four years, give all new pensioners an “income bank” balance of $4000 rather than zero, and permanently lift the maximum income bank balance from $7800 to $11,800. These income banks allow pensioners to accrue unused parts of their $300 fortnightly concession for later use, giving them employment flexibility.

Retirement costs have climbed faster than inflation in recent years because of sharper rises in seniors’ necessities such as food, energy and fuel.

Seniors have more flexibility if they choose to work after pension age. Picture: iStock

MLC senior technical manager Scott Quinn said the new Work Bonus changes would help enable older Australians to work, and reduce the income test’s impact on their age pension.

“It will provide greater upfront incentive once the person reaches pension age to continue with some paid employment, by increasing the amount of their income from work which is ignored when calculating their age pension entitlement,” he said.

“With the growing gig economy, this could provide an opportunity to engage in sporadic or casual employment to help support expenses.

“The Work Bonus is also available to recipients of a Disability Support Pension and Carer Payment who have reached their age pension age but still receive these payments instead.”

Government figures show the workforce participation rate of over-65s more than doubled between 2001 and 2021, from 6.1 per cent to 15 per cent.

COTA Australia, an advocacy group for older Australians, said the legislation changes were welcome but would not solve all the issues facing older workers.

“The new Work Bonus legislation is an important step towards breaking the barriers locking some older people out of the workforce,” COTA Australia chief executive officer Patricia Sparrow said.

“There’s still work to be done on simplifying the system, including better aligning it with the personal tax income system, but we’re hopeful that it will allow some older workers who wish to work to get back into the workforce,” she said.

Patricia Sparrow, chief executive of COTA Australia. Picture: Supplied

“We also need to see real action on one of the major factors locking older workers out of the workforce – systemic ageism.”

Ms Sparrow said ageism was a major reason why many older people who wanted to work did not have employment.

“This incentive payment is a piece in the puzzle, but there’s much more to be done,” she said.

“COTA’s recent State of the Older Nation Report showed that one in 10 pensioners say they would like to remain in work and another two in ten say they’d consider returning to the workforce.”

All pensioners are allowed to receive up to $204 per fortnight of income from any source without affecting the income test. For couples combined, this income-free area is $360.

The Work Bonus only applies to paid employment but adds an extra $300 per fortnight per person – taking the total to $504 before the income test hits.

MLC’s Mr Quinn said it could be a good idea for some seniors to learn how the Work Bonus could benefit them. “You do need to actually be doing something in return for the payment, which is called ‘gainful work income’,” he said.

Originally published as Bigger pensions could flow from changes to Work Bonus for seniors