Pension age goes up and changes to pension assets limits

Article published 26 June 2023

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Pension age goes up this Saturday and other 1 July changes

1 July changes are routine but put this time round it's different with pension age going up and runaway inflation boosting pension assets limits.

LOTS of things to do with the pension will change on 1 July 2023.

Pension age

First up, the pension age will be 67 on 1 July. If you turn 66-and-a-half on 30 June, you’ll be able to claim the pension from that day. But if you turn 66-and-a-half on 1 July, you will have to wait until 31 December.

It will be interesting to see how long it will take for the push to make the pension age 70 to take off now that 67 has been established. Already the Daily Telegraph has covered a new report by Macquarie University’s Business School, which says Australia’s pension system will require a pension age of 70 to be affordable.

Pension asset limits

1 July is also the date on which pension assets limits related to the pension are indexed. That isn’t usually a big deal, but this time round it is worth noting that rampant inflation is having an effect on assets limits.

The lower pension asset test limit for couples, which was $419,000, will increase to $451,500, up almost 8 per cent.

It means a $50 a week pension increase for pensioner couples with between $451,500 or $954,000 in assets. This is not because the pension is going up, but because they will now qualify for a full pension or a higher part pension.

For anyone with assets up to $419,000 there will be no pension increase, because they were already on a full pension.

The higher pension assets limit will also increase substantially, from $954,000 to $986,500. Self-funded retirees with assets above $954,000 up to $986,500 will now be able to claim a part pension.

It’s a similar story for single pensioners. The lower pension assets limit will increase from $280,000 to $301,750. The higher pension assets limit has increased from $634,750 to $656,500. The maximum rise in pension payments for singles as a result of this will be $32.50 per week.

Deeming rates and income free areas

The pension deeming rates themselves are on hold until 1 July 2024, but the deeming thresholds will increase on 1 July 2023. The singles’ threshold will go up from $56,400 to $60,400, while the couples’ threshold will go up from $93,600 to $100,200.

Because the pension income-free areas are also going up (from $190 per fortnight to $204 for singles; from $336 per fortnight to $360 for couples), the vast majority of pensioners will continue to not be affected by deeming rates. This is because deemed income from financial assets will mostly not exceed the income-free area.

However, with interest rates going the way they have been, it’s very likely that after 1 July 2024 the deeming rates will increase. By how much nobody knows.

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