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August 21, 2006
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The=20 Australian =97 Wealth

Question marks over pension 'bonus' scheme

Gillian=20 Bullock

August 16, 2006

STAYING in the workforce past retirement age because you think you = can make=20 a motza on the Pension Bonus Scheme may prove misguided.

While the bonus scheme is handsome in itself - up = to $50,982=20 tax free for couples - it still falls short of the money you would have = received=20 from a full pension during those five years.=20

The scheme was created to encourage people to stay in the workforce = beyond=20 65.

Once you reach retirement age, you have 13 weeks to register for the = bonus=20 scheme.

If you then work anything from a year to five years and don't claim = the age=20 pension during that period, you will receive a tax-free lump sum = payment.

The bonus is not payable to anybody who has claimed income support = payments,=20 with the exception of a carer payment after they reached pension age. =

And at least one of a couple has to remain working.

So, if both you and your spouse have reached aged pension age and one = of you=20 worked for five years beyond that time, then depending on your = Centrelink=20 entitlement, you would be entitled to receive a lump sum payment of up = to=20 $50.892.

Grand though that amount may seem, if you had both been on a full = pension=20 during that five-year period you would have received $840.20 a couple = per=20 fortnight from Centrelink.

Over the five years that would amount to $109,226, double the lump = sum=20 payment.

"The bonus scheme was designed to encourage people to stay in the = workforce,"=20 says George Avramides, technical manager at ING.

"However, you may end up forgoing more pension than you actually = receive as a=20 bonus."

Of course, continuing work beyond pension age and deferring pension = payments=20 for up to five years will mean that you receive more compulsory super = payments=20 to provide further retirement income.

The downside is that you may end up with a lower pension entitlement = simply=20 because you have more assets.

This may be offset when the asset taper rate is cut from $3 to $1.50 = per=20 $1000 above the threshold level in September next year.

This is because you will be allowed a much higher level of assets = before the=20 pension cuts out.

If you choose to take advantage of the pension bonus scheme, there = are a=20 couple of tips of which you need to be aware.

Firstly, if you want to get the full bonus as a couple then while = only one=20 person needs to work the five years to qualify, both members of the = couple must=20 be at age pension age for a full five years.

So, if you are 65 and your spouse is only 55, you will not be able to = claim=20 the bonus on their behalf were you to retire and claim the bonus at age = 70, as=20 your spouse would still be under age pension age when you stopped work. =

Your spouse would either have to settle for less than the full amount = (pro=20 rata on the number of years beyond age pension age they were at the time = the=20 bonus was claimed) or work five years beyond age pension age and qualify = in=20 their own right for the bonus.

There is a way around this. Say there was a 12-month age gap between = you and=20 your spouse, then you would just need to work an extra year so the pair = of you=20 would have both been at age pension age for a full five-year period. =

Avramides cites a case study of Mark, 65, and Mary, 64, who both = registered=20 for the bonus when they turned age pension age. Mark deferred claiming = the age=20 pension and continued working until he was 70. His wife, Mary, = meanwhile, who=20 was not working, also deferred claiming the age pension during that = time.

However, since she was some 11 months younger than Mark, when he = retired at=20 70, her pension bonus was lower as she had only deferred the pension for = four=20 years and five weeks.

Assuming the couple's Centrelink age pension entitlement was $400 = each a=20 fortnight ($800), Mark's lump sum bonus would have been $24,440 because = he=20 deferred the full five years; Mary's would have come in significantly = lower at=20 $16,401 because she had only deferred her pension for 4.096 years.

They could have got around this by Mark working for another 47 weeks = and=20 deferring their drawing a pension until then. This would have then = delivered=20 them $24,440 apiece.

If you still want to work beyond retirement age, then the bonus = scheme is a=20 nice little windfall down the track.

But it does little more than pay you back some of the pension that = you might=20 have received over those years had you not chosen to stay in the = workforce and=20 defer any Centrelink entitlement.

Still, hopefully you would also have enjoyed the income from work, = the=20 routine and the connections and identity that go with work for a longer = period.=20

Print = Friendly=20 Version Email = this story

In this section

Lurks=20 and perks of life over 50
Fees=20 not always the best measure of performance
Long=20 list of winners in short story
Old=20 campaigners that are still travelling well
Question=20 marks over pension 'bonus' scheme
The=20 rules for buying property properly
Three=20 years building house gave teen twins their start
Bidders=20 in wings for royal Merc
Calls=20 for further easing of super curbs
Caltex=20 pumps up the volume
Do=20 the sums before you buy quick fix
Facing=20 up to phasing down

The=20 Australian =97 Wealth

Question marks over pension 'bonus' scheme

STAYING in the workforce past retirement age because you think you = can make=20 a motza on the Pension Bonus Scheme may prove misguided.

In this section

Lurks=20 and perks of life over 50

Fees=20 not always the best measure of performance

Long=20 list of winners in short story

Old=20 campaigners that are still travelling well

Question=20 marks over pension 'bonus' scheme

The=20 rules for buying property properly

Three=20 years building house gave teen twins their start

Bidders=20 in wings for royal Merc

Calls=20 for further easing of super curbs

Caltex=20 pumps up the volume

Do=20 the sums before you buy quick fix

Facing=20 up to phasing down