Can You Have $2 Million in Assets and Still Receive the Age Pension?

Can an Australian couple have around $2 million in assets outside their family home and still qualify for some Age Pension?

In certain circumstances, yes.

Many Australians assume that once they have accumulated substantial retirement savings, Centrelink benefits are automatically out of reach. However, Age Pension eligibility isn't based simply on adding up everything you own.

How and where your assets are held can make a significant difference. This can be particularly important for couples where one spouse has reached Age Pension age and the other has not.

The treatment of superannuation in this situation can create a period where a couple with significant overall wealth may still qualify for a part Age Pension.

That doesn't mean every couple with $2 million will qualify. Centrelink applies both an income test and an assets test, and eligibility and payment rates depend on individual circumstances. But it does show why understanding the rules before making retirement decisions can be valuable.

Your Home and the Age Pension Assets Test

Consider a hypothetical couple. One spouse is 67 and the other is 64. Between them, they have substantial superannuation savings, $100,000 in the bank and another $100,000 in vehicles and perhaps a caravan.

They also own their family home.

Looking at their total financial position, they might assume they have too much wealth to receive the Age Pension. But Centrelink doesn't treat every asset in the same way.

The principal home is generally exempt from the Age Pension assets test. In other words, the value of the home you live in normally isn't included when Centrelink calculates your assessable assets.

Superannuation can also receive different treatment depending on the owner's age and whether the money is held in accumulation phase or is paying an income stream.

For couples with an age gap, this distinction can be particularly important.

How a Younger Spouse's Super Can Affect Eligibility

Generally, superannuation held by a person who is below Age Pension age is not counted under the Age Pension income and assets tests if the fund isn't paying them a superannuation pension.

Return to our hypothetical couple.

The 67-year-old has reached Age Pension age, while the 64-year-old hasn't. If a substantial portion of the couple's retirement savings is held in the younger spouse's accumulation-phase super account and no pension is being paid from that account, that money may not currently be included in Centrelink's assessment.

This means the couple's assessable assets could be considerably lower than their overall net worth.

Depending on their circumstances, it may also be possible for an older spouse who is eligible to access their super to withdraw benefits and make contributions to the younger spouse's super account.

Subject to the superannuation contribution rules and Centrelink treatment applying at the time, doing so may change the amount of assets assessed for Age Pension purposes and could affect the older spouse's entitlement.

However, this isn't as simple as moving as much money as possible from one spouse to another.

Superannuation contributions are subject to contribution caps, age and eligibility requirements and other rules. A withdrawal and recontribution strategy can also have tax, estate-planning and longer-term retirement consequences.

The overall financial outcome therefore matters more than simply seeking to increase Age Pension payments.

Why Even a Part Age Pension Can Matter

Depending on the couple's circumstances and the rules applying at the time, a part Age Pension may provide additional retirement income during the period before the younger spouse reaches Age Pension age.

That additional income could help fund everyday retirement expenses and may affect how much the household needs to draw from other savings and investments.

The pension payment itself may not be the only consideration.

Qualifying for a part Age Pension can also provide access to the Pensioner Concession Card and associated concessions, subject to the relevant eligibility rules. These concessions may assist with some healthcare and household costs.

This doesn't mean retirees should restructure their finances solely to obtain Centrelink benefits. Instead, the important question is whether their current financial structure, objectives and circumstances could affect an entitlement for which they may otherwise qualify.

The Opportunity Is Temporary

There is an important limitation.

Once the younger spouse reaches Age Pension age, their superannuation will generally become assessable under the Age Pension means tests, even if it remains in accumulation phase.

In our example, the younger spouse is 64. As Age Pension age is currently 67, there may therefore be a period before their super becomes assessable.

During that period, the younger spouse's accumulation-phase super may remain outside the means tests, provided it is not paying them a superannuation pension. Once they reach Age Pension age, however, the position generally changes.

If the couple's assessable income or assets then exceed the relevant thresholds, their Age Pension entitlement may reduce or cease.

Any benefit obtained during the earlier period therefore needs to be considered alongside the longer-term consequences of restructuring the couple's superannuation and other assets.

It is best considered as part of a longer-term retirement plan rather than as a permanent solution.

Look at the Whole Retirement Strategy

One of the most important lessons is that Centrelink, superannuation, investments and tax shouldn't be considered in isolation.

A decision involving one area can affect another.

For example, changing how superannuation is held could affect Centrelink eligibility. Moving money between spouses could affect contribution caps and future retirement planning. A strategy that changes Age Pension payments could also have tax, investment or estate-planning consequences.

The objective therefore shouldn't automatically be to maximise the Age Pension.

A broader approach is to consider the household's complete financial position and how superannuation, investments, government entitlements, tax and lifestyle spending interact over retirement.

For couples with an age gap, the period between one spouse reaching Age Pension age and the younger spouse reaching that age can be particularly important.

If you're approaching this stage, it may be worth reviewing your position rather than assuming a high level of retirement savings automatically makes you ineligible for assistance.

Sometimes it's not simply how much money you have that matters. It's how the rules apply to where that money is held.

Check the Current Rules Before Making Changes

Age Pension rates and means-test thresholds change over time. Superannuation contribution caps and eligibility requirements can also change.

Centrelink applies both an income test and an assets test, with the test producing the lower entitlement determining the amount of Age Pension payable.

Before withdrawing super, contributing money to a spouse's super account or restructuring investments, check the current rules with Services Australia and the Australian Taxation Office.

Professional financial advice can also help determine whether a particular strategy is appropriate when considered alongside your Centrelink position, tax circumstances, investment strategy, estate planning and longer-term retirement needs.

Important information: The information in this article is general in nature and has been prepared without considering your personal objectives, financial situation or needs. It does not constitute personal financial advice. Before making financial decisions, consider whether the information is appropriate for your circumstances and consider seeking professional financial advice. Where a financial product is involved, you should also consider the relevant Product Disclosure Statement (PDS) before making a decision.