We answer your financial questions in a nutshell. Will part-time work affect your pension?
- Financial Planning
Supplementing your income with part-time work is an attractive option for some retirees. However, what effect will this have on your finances and pension entitlements? Here is a quick guide to making things work in your favour.
It’s no secret that the government is keen for us to work longer, in order to take the pressure off the social security system. The qualifying age to be eligible for the aged pension is now creeping upwards, but, what is the situation for those of us who have already retired?
Many retirees are still keen to enjoy the stimulation or social contact that work can provide and others like the idea of supplementing their income with some paid employment if the opportunity arises.
So what are the impacts on your pension if you do earn income through working and what financial incentives are available from the government to allow you to keep working casually or part-time? Here are some easy pointers to help you get the best deal.
Smaller amounts of income won’t affect your pension
The good news is if you are receiving a Centrelink or the Department of Veterans' Affairs pension and are in retirement you are allowed to earn a certain amount per fortnight without any impact on your pension.
If you are single you can earn up to $162 a fortnight without any pension reduction. Every dollar earned over this limits can reduce your pension payment by 50 cents.
If you are a couple you can earn up to $288 a fortnight without any pension reduction. Every dollar earned over this limit can reduce your pension payment by 25 cents (per person). The tapering rate is 50 cents per couple or 25 cents per member of a couple.
It is important to be aware that any income earned over these amounts will result in a reduced pension.
Additional benefits from the Work Bonus scheme
In addition to the above limits, you may also be eligible to benefit from the Government’s Work Bonus scheme. The scheme has been designed to provide an incentive for retirees to continue working and earning. It applies to income earned as an employee, so it excludes self-employment income or investment income.
Under this scheme an additional $250 a fortnight is quarantined from the pension income test. This amounts to an annual figure of $6,500 per annum that can be earned without any effect on pension entitlements.
What if your earned income is irregular?
Of course, for many of us who choose to work during retirement, income may not be earned in regular fortnightly amounts. Work may be seasonal or you may simply choose to be flexible, only work for a certain part of the year and enjoy your free time for the rest of the year. Why not? Fortunately, the Work Bonus scheme takes this reality into account.
On the weeks when you are not working you can ‘carry over’ the $250 a fortnight allowance and accumulate this bonus amount. Then when you eventually do work you can apply this accumulated bonus to any amounts you are earning over $250 a fortnight.
For example, if you earn $500 in a particular fortnight and you have some bonus amounts accumulated from earlier in the year, the full $500 will be exempt, so you don’t lose any pension benefits. This enables you to get the full benefit from the $6,500 annual limit, even if you are only working for a small part of the year.
For further details on the Work Bonus scheme and how you can benefit, visit this website.
Are you retired but still working? Do you do it for enjoyment or out of necessity? Join the conversation below.