Age pension ‘left on the table’ as retirees delay their applications

Australia’s age pension pays singles $29,754 and couples $44,855 annually, but many lose some unnecessarily. Here’s why.

Many newly-retired Aussies don’t think they qualify for a pension. Picture: iStock

Senior Australians are missing out on money when they enter retirement, as many don’t seek an age pension for two or three years after they leave work.

Confusion, apathy and a lack of understanding and advice around the generous age pension assets test are among reasons for the delays, financial specialists say.

Research by Australia’s third-largest superannuation fund, Aware Super, has found that 32 per cent of retirees apply for the government age pension at least a year later than they could have.

“Your average member, as they go into retirement, typically takes two or three years – even though they’re eligible for the age pension they don’t typically get it until two to three years later,” said Aware Super CEO Deanne Stewart.

“It often comes down to the fact they are confused about the rules and often assume they are not eligible,” she said.

Aware Super CEO Deanne Stewart. Picture: Supplied

“There are groups of people who are still working and assume they can’t access it, which is not true in many cases, especially if they are only working a few hours a week.

“We see others delay in applying because they assume they will not pass the Centrelink assets and income tests.”

However, Centrelink means testing is more flexible and generous than many people think, although the rules can be complex.

For example, a homeowner couple can also have $1.04m of super or other assets apart from their home and still receive some age pension with associated health and other discounts.

A non-homeowner can hold even more assets – $1.29m, while income testing allows couples to earn a combined $1911 each week before all age pension is cut off.

MBA Financial Strategists director Darren James said apathy was an issue for some retirees, along with confusion about the rules.

“The work to be done to get it when trying to do it by themselves can seem all too hard,” he said.

“It looks like an enormous task in front of them to provide all the information and open themselves up to Centrelink – privacy is a factor for clients.”

Mr James said he also saw people not applying for the Commonwealth Seniors Health Card, which has more generous means testing – income below $99,025.

“There’s a portion of people not believing they are entitled to much, so they don’t do it,” he said.

However, every dollar of pension gained by a retiree is a dollar of their own money they do not have to spend, and today’s longer lifespans suggest retirees should keep whatever they can.

“At the end of the day, if you can use government money to supplement some of your income, you get to preserve your own funds,” Mr James said.

“It gives you more options in retirement, and the benefits and concessions can be quite substantial – especially in a cost-of-living crisis.”

Aware Super’s Ms Stewart said it was worth reviewing pension eligibility annually, even if just to potentially qualify for the “valuable” Commonwealth Seniors Health Card.

“Even if they aren’t eligible at 67, many Australians will become eligible in the future as they start drawing down their super and other assets in retirement,” she said.

Ms Stewart said Australia’s ageing population meant more people were seeking tools and advice about retirement.

“One stat that I think is fascinating is that for those that reach 65 today, 25 per cent or one in four will go on to live beyond 95,” she said.

“That is 30-plus years.

“Our guidance demand has increased by 50 per cent in the last year alone.”

People were also becoming more engaged as their super balances grew amid Australia’s maturing superannuation system, Ms Stewart said.