Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 453

Age pension is increasing: what you need to know

Australia’s age pension rose in March reflecting rising inflation and the growing cost of living pressures. This represents a pay rise of just over 2% and is the biggest increase in the payment in almost a decade.

Single pensioners will be $20.10 better off per fortnight, and couples up to $30.20 per fortnight (where both members of the couple are eligible).

Indexation also means that some people who were previously ineligible for a pension may become eligible as the cut-off amounts of assets and income are also increased.

But older Australians receiving aged care need to know that an increase in the pension also means an increase in their Basic Daily Fee. This means they’ll only see $4 of the $20 pension increase.

In this article, we’ll walk through the changes step by step and what they mean for you.

Payments

The maximum rate of age pension payment for singles increased by $20.10 per fortnight from $967.50 to $987.60. The maximum rate for couples increased by $15.10 each from $729.30 per fortnight for each eligible member to $744.40.

A couple where both members are eligible to receive the maximum payment can receive $1,488.80 per fortnight or $38,708.80 per year combined.

Source: Services Australia

The assets and income level before pensions are disqualified under the means tests have also increased.

Assets

For homeowners who are single, the asset test cut-off increased from $593,000 to $599,750. For couples it increased from $891,500 to $901,500.

For couples who are separated by illness, as is the case when one or both move into aged care, the cut-off increased from $1,050,000 to $1,063,500.

*It’s important to remember that the value of your home is not included in these assets.

Income

For singles, the amount of income you can earn before the age pension ceases has increased from $2,115 per fortnight to $2,155.20. For couples, the cut-off has increased from $3,237.20 per fortnight to $3,297.60.

*It’s important to remember that income earned under the work bonus (up to $7,800 per year) is not included. Income from investments is based on deemed income, rather than the actual income earned.

In announcing the changes Minister Anne Ruston said, “This is putting money in the pockets of all Australians who rely on our social security system and, in particular, older Australians.

But older Australians receiving aged care, whether that’s a Home Care Package or residential aged care, need to know that an increase in the pension also means an increase in their Basic Daily Fee.

The Basic Daily Fee you pay towards your cost of aged care is set based on a percentage of the Age Pension. In a Home Care Package, the maximum Basic Daily Fee is set at 17.5% of the basic Age Pension (and applies to people on a Level 4 Package) it was $11.02 per day and has increased to $11.26 per day from 20 March.

In a Home Care Package, the Basic Daily Fee is based on the level of your package:

  • Level 1 was $9.88 per day increasing to $10.08
  • Level 2 was $10.44 per day increasing to $10.66
  • Level 3 was $10.74 per day increasing to $10.97
  • Level 4 was $11.02 per day increasing to $11.26

So, if the fortnightly pension increases by $20.10, up to $3.36 will be needed to meet the increased cost of a home care package.

In residential aged care, the Basic Daily Fee is set at 85% of the basic Age Pension, it was $53.56 per day, increasing to $54.69.

This means that the Basic Daily Fee increase is $15.82 a fortnight, so of the extra $20.10 in Age pension, people living in aged care will only have $4.28 per fortnight to cover increases in their cost of living.

While the Basic Daily Fee does cover some of the cost of living in aged care such as meals, utilities and insurances, many aged care residents need to pay extra or additional service fees to cover alcohol, food, entertainment, and personal services. Personal expenses such as clothing, medications, health care, other insurances, transport, and communication costs remain the responsibility of the resident.

A $4 per fortnight increase in the Age Pension for people living in aged care is definitely a pay cut, not a pay rise.

 

Rachel Lane is the Principal of Aged Care Gurus where she oversees a national network of adviser dedicated to providing quality advice on retirement living and aged care. She is also the co-author of a number of books with Noel Whittaker including the best-seller 'Aged Care, Who Cares?' and their most recent book 'Downsizing Made Simple'. To find an adviser or buy a book visit www.agedcaregurus.com.au.

 

RELATED ARTICLES

12 tips for ‘aged care season’

Biggest change in the Aged Care Interest Rate since the GFC

Recent age pension changes impact non pensioners too

banner

Most viewed in recent weeks

How much do you need to retire comfortably?

Two commonly asked questions are: 'How much do I need to retire' and 'How much can I afford to spend in retirement'? This is a guide to help you come up with your own numbers to suit your goals and needs.

Meg on SMSFs: Clearing up confusion on the $3 million super tax

There seems to be more confusion than clarity about the mechanics of how the new $3 million super tax is supposed to work. Here is an attempt to answer some of the questions from my previous work on the issue. 

The secrets of Australia’s Berkshire Hathaway

Washington H. Soul Pattinson is an ASX top 50 stock with one of the best investment track records this country has seen. Yet, most Australians haven’t heard of it, and the company seems to prefer it that way.

How long will you live?

We are often quoted life expectancy at birth but what matters most is how long we should live as we grow older. It is surprising how short this can be for people born last century, so make the most of it.

Australian housing is twice as expensive as the US

A new report suggests Australian housing is twice as expensive as that of the US and UK on a price-to-income basis. It also reveals that it’s cheaper to live in New York than most of our capital cities.

Welcome to Firstlinks Edition 566 with weekend update

Here are 10 rules for staying happy and sharp as we age, including socialise a lot, never retire, learn a demanding skill, practice gratitude, play video games (specific ones), and be sure to reminisce.

  • 27 June 2024

Latest Updates

Investment strategies

The iron law of building wealth

The best way to lose money in markets is to chase the latest stock fad. Conversely, the best way to build wealth is by pursuing a timeless investment strategy that won’t be swayed by short-term market gyrations.

Economy

A pullback in Australian consumer spending could last years

Australian consumers have held up remarkably well amid rising interest rates and inflation. Yet, there are increasing signs that this is turning, and the weakness in consumer spending may last years, not months.

Investment strategies

The 9 most important things I've learned about investing over 40 years

The nine lessons include there is always a cycle, the crowd gets it wrong at extremes, what you pay for an investment matters a lot, markets don’t learn, and you need to know yourself to be a good investor.

Shares

Tax-loss selling creates opportunities in these 3 ASX stocks

It's that time of year when investors sell underperforming stocks at a loss to offset capital gains from profitable investments. This tax-loss selling is creating opportunities in three quality ASX stocks.

Economy

The global baby bust

Across the globe, leaders are concerned about the fallout from declining birth rates and shrinking populations. Australia, though attractive to migrants, mirrors global birth rate declines, and faces its own challenges.

Economy

Hidden card fees and why cash should make a comeback

Australians are paying almost two billion dollars in credit and debit card fees each year and the RBA wil now probe the whole payment system. What changes are needed to ensure the system is fair and transparent?

Investment strategies

Investment bonds should be considered for retirement planning

Many Australians neglect key retirement planning tools. Investment bonds are increasingly valuable as they facilitate intergenerational wealth transfer and offer strategic tax advantages, thereby enhancing financial security.

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.