Earn without losing your Age Pension

Introduction

Simone: [00:00:01] Some people want to stay active in retirement and keep connecting with coworkers. So, you know, just having a purpose that's more the lifestyle point of view and financially, because maybe they want to earn a little bit extra in retirement so they can continue to have a decent lifestyle as well. And retirement, it's not like one fit for all. So everyone does it differently. Some people want to ease into retirement, so maybe keep working a little bit until they decide is the time to fully retire. 

Andrew: [00:00:39] Many retirees in Australia will qualify for a full or partial Age  Pension, but you may decide to continue working after 67 for financial reasons, to maintain social contact and a sense of purpose. But how might these earnings impact your eligibility for the Age Pension? Well, in this episode, we'll explore the work bonus and find out how much you can earn without reducing your pension. So keep listening to shift the way you think about your super. From CBUS, I'm Andrew Mackinnon and this is the CBUS Super Shift podcast. Joining me for this chat is CBUS coordinator Tim Jovic, a plumber by trade with 30 years under his belt. These days he's a CBUS coordinator guiding members to grow their super. Tim, it's great to have you here today. 

Tim: [00:01:35] Thank you. Andrew. Thank you for having me. And hello to all our members out there listening. 

Andrew: [00:01:39] And from the Advice team is Simone Toto, a CBUS Superannuation Adviser with two decades of experience in banking and financial planning. Simone, it's also great to have you here. 

Simone: [00:01:51] Thank you very much. Thanks, Andrew. 

Andrew: [00:01:53] Now, just before we dive in, I want to remind listeners that the information in this podcast is general in nature and may not account for your specific needs. Please consider your financial position, objectives and requirements before making financial decisions. Please read the relevant product disclosure statement and target market determination on our website to decide if CBUS is right for you. We'd also like to remind listeners that past performance is not a reliable indicator of future performance. Okay, let's get to it. While retirement for some might mean tools down to travel, devote time to family, or indulge in passion projects, for others work of some kind doesn't end. 

Retirement is not one size fits all

Simone: [00:02:42] I think some people want to stay active in retirement and keep connecting with co-workers. So just having a purpose that's more the lifestyle point of view. And financially, because maybe they want to earn a little bit extra in retirement so they can continue to have a decent lifestyle as well. And retirement. It's not like one fit for all. So everyone does it differently. Some people want to ease into retirement, so maybe keep working a little bit until they decide it's the time to fully retire. 

Andrew: [00:03:14] Tim. We're seeing more members easing into retirement rather than stopping work completely. What seems to be the trend with members you chat to on site? 

Tim: [00:03:24] Yeah, it can be common, not just necessarily recently retired. They may retire after 1 or 2 years and then feel as if they could do with a little bit of extra income. We could all do a little bit of extra income. Also to remain active, get out of the house, have a little bit of purpose. So it's, um, it is pretty common. 

Working a few hours a week and the Work Bonus

Andrew: [00:03:47] Well, let's talk about the Work Bonus. It's a Centrelink scheme that allows eligible pensioners to keep more of their Age Pension while they work. So we asked some members what they thought about working after retirement and if they'd heard of the Work Bonus. 

Layla 24: [00:04:00] After I retire. Sounds silly, but I'd probably want to work in like a little retail store. Maybe like 1 or 2 days a week just to get that social interaction still, because I feel like people don't expect to lose that kind of social interaction. 

Wally 59: [00:04:18] No, I don't want to work. I'm hoping if everything falls into place, which I'm on schedule 63, 64, I'd like to retire. So I want to have at least a good 15 years of life.  

Nasrullah 23: [00:04:32] Oh yeah. I think working is good, you know, but, um, it depends. Like, if I'm unable to work physically, then there's no point working, is there? 

John Doe3: [00:04:40] Just keep the brain kind of working. 

Nasrullah 23: [00:04:42] Yeah, exactly. You get crazy at home by yourself, trust me. 

John Doe3: [00:04:46] Have you heard of the Work Bonus? 

Wally 59: [00:04:48] Uh. Work Bonus? Uh, no. 

Nasrullah 23: [00:04:50] No, I know we get bonuses at work, if that's what you're referring to. 

John Doe3: [00:04:55] No Work Bonus. That is something I've never heard of. I have no idea what Work Bonus is. 

Andrew: [00:05:02] Okay, so what you need to know about the Work Bonus is that for older Australians, it offsets some of their income and acts as an incentive to participate in the workforce. What the Work Bonus is not is an extra payment. It simply lets you keep more of your Age Pension. 

Simone: [00:05:18] It allows pension recipients to continue to work without potentially affecting their payments. Basically, it's an encouragement to flexible retirement so you can keep earning without losing your pension, which makes the retirement sort of less rigid. 

Age Pension income tests

Andrew: [00:05:36] When it comes to the Age Pension, what are the income test limits if you're still working and earning? 

Simone: [00:05:42] So the income test is where your income from all sources is looked at. And this includes your partner. It includes financial assets such as savings, shares and superannuation. You may hear the term deeming a lot in this space and these are rules to work out income from your financial asset, including investment. Instead of looking at the actual interest of return that asset received, the government set a standard rate to keep things fair and simple. It also helps keep your Age Pension payments stable, instead jumping up and down every time your investment return change. So to work out how much income your financial asset produce, Centrelink call this deeming. 

Andrew: [00:06:33] So how much can eligible pensioners earn before it affects their pension? 

Simone: [00:06:38] Up to $300 per fortnight under the Work Bonus. And this is on top of the regular income test. So the income test still applies, it doesn't disappear, but the Work Bonus helps to reduce the impact of earning when you retire. If you're a single or a couple, something to bear in mind is that the income test may vary, and that will affect the potential impact of the Work Bonus on your earnings. So if you earn over the income test cutoff point, the Age Pension is reduced to zero. 

More about the Work Bonus

Andrew: [00:07:15] And Simone, if you don't use the full $300, does the Work Bonus carry over? 

Simone: [00:07:20] Short answer yes. So if you don't use the $300 allowance every fortnight, it will build up to a maximum of $11,800. And this is what I mean before by flexibility. There may be periods that you don't want to or need to work, but the amount keeps building up so you can earn more now or later and your Age Pension won't be impacted under the income test. The other great thing is that the Work Bonus is set up automatically. You don't need to apply for it manually. 

Andrew: [00:08:02] So the $300 credit is added to your Work Bonus balance fortnightly, which keeps accruing to a balance of $11,800 in credit. You can think of the Work Bonus balance, like an account where the credit is used to reduce the amount of your work income and does not count towards the income test for your pension. Tim, how do you see the additional income making a difference for the members you speak to? 

Tim: [00:08:25] Well, you can make a big difference or even small differences. You know, it can be a difference between having a small little holiday or your day to day costs. So it can be small or big differences. 

Andrew: [00:08:36] That's so true. Also, because the Work Bonus is just one government scheme that provides support. And when you consider the cumulative impact of different sources of income support, it's absolutely worth calling CBUS to find out what you might be eligible for. Simone, does the bonus apply to only certain types of work? 

Simone: [00:08:56] It's paid work only either employment or self-employment that can be casual part time or full time. Any type of work is eligible except unpaid or voluntary work that doesn't form part of your Work Bonus. 

The Work Bonus and the Age Pension

Andrew: [00:09:11] and does the Work Bonus apply to everyone on the Age Pension? 

Simone: [00:09:15] The short answer is you can get the Work Bonus if you are of Age Pension age and you are receiving one of these payments. You know the Age Pension, the Carer payments or the disability support pension. If that's you and you're doing some paid work, the Work Bonus applies automatically. There's nothing extra you need to sign up for. 

Andrew: [00:09:41] So absolutely make sure that Centrelink is aware of any extra income you make. Not only so they can apply the eligible Work Bonus, but that you're not stung down the track having to pay back any money. 

Simone: [00:09:53] Yeah, because you know, you don't want to go through like overpayment or underpayment because when they balance up there could be implications if you don't do your duty correctly. 

Andrew: [00:10:03] So given that your Age Pension may reduce, it's important to understand exactly how much you're eligible for and keep an eagle eye on how much income you're making from work. 

Keeping Centrelink updated

Simone: [00:10:12] Yeah, look, it's Centrelink is there, so keep them up to date. We'll make sure that you're receiving what you're entitled to. And there is no surprise either way. Maybe you're entitled to a little bit more, or maybe your pension will be affected by the extra earnings. 

Tim: [00:10:29] And interestingly, with Centrelink, if you are overpaid, they will get that amount back from the date of the overpayment. And if you're underpaid for a period then they'll only begin the extra payments from the date of reporting. 

Andrew: [00:10:43] Yeah, it's just worth keeping in mind that overpayments and underpayments are handled differently. And for underpayments, there are limitations around how far back Centrelink will pay. Simone, as we wrap up, I want to make sure people avoid some of the more common mistakes when it comes to the Work Bonus. 

Simone: [00:11:02] Yeah. Look, like we just mentioned is not reporting the income properly, which can lead to overpayment or underpayment or, you know, assuming that all income are treated the same. Remember, only work income qualify for the bonus and, you know, missing out of the buffer because if you don't use it, you know, you could have like a Work Bonus bank up to $11,800. So some people don't realize they have these, um, Work Bonus bank and they potentially can take advantage of it. That's why reporting correctly will help to have the right entitlement. 

Tim: [00:11:43] And having understanding themselves exactly where they're at, so they don't miss out on any potential payments. 

How to learn more about money in retirement

Andrew: [00:11:53] Now, we might not have covered every single detail in this episode, but there's a bunch of things you can do to take control of your super. Attend an Age Pension seminar or webinar. Just head to the CBUS website. Search for education sessions to find one that suits you. You can also listen to more of the CBUS Super Shift podcast, which covers a range of topics to help you make the most of your super now. There's also How the Age Pension Works Factsheet, which covers the information we've discussed today and so much more. You could also hop online and use one of our calculators to see how much super you might have when you retire, and how much income that could provide, or to get an estimate of how much age pension you're likely to receive. And when you can apply for it. And of course, there's the website CBUSsuper.com.au for more detail on everything you've heard in this episode. There's also the CBUS advice team you can contact on 1300 361 784, where you'll find stellar support from people just like Simone and reach out to the on site co-ordinators like Tim, or even walk into the CBUS front counters located in each state, and you'll find staff ready to help. All of this information can also be found in the show notes of this episode. Tim, thanks so much for joining me on the podcast. 

Tim: [00:13:22] Thanks for having me, Andrew, and goodbye to all our members. The support's always here with us and thanks for listening. 

Andrew: [00:13:29] And Simone, same to you. Thanks so much for your guidance on this. 

Simone: [00:13:33] Thank you as well, Andrew. It's been a pleasure. 

Andrew: [00:13:36] You've been listening to the CBUS Super Shift podcast. Listen to more episodes at CBUSsuper.com.au/podcast or follow at Apple Podcasts, Spotify, or wherever you listen to podcasts.