How does an allocated pension affect Centrelink payments? [Updated March 2024] March 29th, 2024
An allocated pension, also known as an account based pension (ABP) is one of the range of financial assets used in determining your pension under the income test and the asset test.
Remember, the test that produces the lowest pension is the one that’s used by Centrelink.
A very important point to remember is that regular payments from the ABP or lump-sum withdrawals are not counted as income.
We also have a great tip for couples of different ages at the bottom of this article.
Income test and ABPs
Under the income test, the value of your ABPs are added to the other financial assets. These include bank accounts, shares, managed funds, bullion and cash. Superannuation funds are included when they are in accumulation phase, but ONLY if the fund is in the name of someone over pension age (more on this later).
The grand total is deemed to be earning a certain rate of interest. While the deemed interest rates are the same, namely 0.25 percent and 2.25 percent per annum, the thresholds where these kick-in are dependent on whether you are a single or a couple (remember, Centrelink effectively view couples as a single entity).
For singles, the 0.25 percent applies to the first $60,400 and everything above that is deemed to be earning 2.25 percent.
For couples, the 0.25 percent applies to the first $100,200 and everything above that is deemed to be earning 2.25 percent.
The annual total is divided by 26 to give us a fortnightly amount. This is then tested against the income-free-are which for singles is $204 a fortnight and for couples, $360 a fortnight. If the deemed fortnightly income plus other assessable is over these limits, then the pension you receive is clipped by 50 cents per fortnight for each dollar over.
Asset test and ABPs
The allocated pension / ABP balance is added to the other assessable assets you own and this grand-total is tested against the asset test thresholds.
For a single home-owner to receive a full pension under the asset test, total assets must less than $301,750. For a non home-owner, an additional $242,000 is allowed which lifts the threshold to $543,750.
For a home-owning couple to receive a full pension under the asset test, total assets must be less than $451,500. For a non home-owning couple, an additional $242,000 is allowed which lifts the threshold to $693,500. That’s because a couple is a regarded as single entity.
Netplan Tip for couples of different ages
If a couple have different ages with one member being UNDER age pension age (67), it might be worth keeping some of the money in the younger person’s name in superannuation accumulation phase. That’s because it is not assessed under either income or asset means-tests until they reach age pension age. You might have some money in an ABP for the person over pension age and the remainder in the younger person’s name.
The maximum rate you could receive in this case is half the couple’s rate which would be $841.40 a fortnight or an annual total of $21,876.40.
Not to be sneezed at!
Of course, once the younger person reaches age pension age, the money in superannuation accumulation phase would be included in means-testing and that might then blow you out of the water for an age pension.