What you should know if you’re on the Pension Bonus Scheme
23 November 2016
Are you a registered member of the Pension Bonus Scheme? You may need to act now ...
If you’re a member of the Pension Bonus Scheme, your bonus may be significantly affected after 1 January 2017. If you’re still working and you are 72 or over for males, 70 or over for females, you should be aware of changes that will come into effect on 1 January next year. Depending on your situation, you may receive a reduced bonus payment as a result of these changes, or you may no longer be eligible to receive a bonus. So it’s important to understand what these changes are and how you could be affected. If you’re unsure about what to do, speak to a financial planner.
Here we answer a few common questions about the Pension Bonus Scheme.
I’m a member of the Pension Bonus Scheme and I’m not yet receiving the Age Pension, how will this affect me?
The bonus is directly affected by the amount of Age Pension you’re entitled to receive once you claim the Age Pension. Say for example, as a result of the 1 January 2017 asset test changes to the Age Pension, your Age Pension entitlement is less when you make your claim than what it would have been before the changes. This means that your bonus will also be less than what it would have been before the 1 January 2017 changes.
What can I do to maximise my Pension Bonus Scheme payment?
For some people, claiming the Age Pension before 1 January 2017, instead of after 1 January 2017 when the changes come into effect, could mean receiving a higher bonus payment.
It may even be possible to claim your Age Pension and bonus while you’re still employed e.g. by taking unpaid leave.
If you fall into this group of people, you will need to take action soon. This is because you may need to consider taking action such as retiring now or taking unpaid leave in order to claim your Age Pension and bonus before 1 January 2017.
However, whether or not you will benefit from claiming your Age Pension and bonus before instead of after 1 January 2017 will depend on your particular circumstances, which we have not considered. So if you are a member of the Pension Bonus Scheme please contact your planner to see if claiming your Age Pension and bonus before 1 January 2017 would be beneficial for you.
What’s the Pension Bonus Scheme and who’s eligible?
The Pension Bonus Scheme was designed to encourage older Australians to defer taking their Age Pension and stay in paid work. You must have fulfilled eligibility criteria to qualify for the bonus, and must have registered for the scheme by 1 July 2014. The scheme is now closed to new members.
If you are a registered member of the Pension Bonus Scheme, when you eventually claim the Age Pension you may be able to receive a tax-free lump sum payment (bonus) if you worked beyond the Age Pension age, provided you also meet other eligibility criteria. These include:
- You must not have received Age Pension or any other income support payment (other than Carer Payment) since qualifying for the Age Pension
- You must meet the work test rules for at least 12 months from the date your membership in the scheme started.
How is my Age Pension entitlement assessed?
From 1 January 2017 there are changes to how Centrelink or the Department of Veteran’s Affairs (DVA) will assess your entitlement for the Age Pension under the assets test. Some people may be better off but many may see a reduction in the amount Age Pension they receive. These changes apply to both the upper and lower assets thresholds, and are different for singles, couples, home owners and non-homeowners. It can be quite complex trying to work it all out, so if you’re unsure we’d recommend that you see a financial planner.