How holidaying or retiring overseas can impact your Age Pension
Australia’s Age Pension is designed to help seniors who have reached retirement age and are deemed to be in constrained financial circumstances. The full Age Pension is payable only to long-term, permanent Australian residents with little other income and no assets to sell (their home is not considered an asset).
But seniors who leave Australia can find that Centrelink reduces or even cancels their Age Pension payments.
The six-week holiday limit
Holidaying Australian residents continue to be paid their full Age Pension and pension supplements for a maximum of six weeks after leaving Australia. In other words, most age pensioners can holiday for no more than six weeks without losing any Age Pension benefits.
After six weeks the clean energy supplement stops. In dollar terms, for a single Age Pensioner (at January 2019), that’s a loss of $14.10 per fortnight.
However, the main pension supplement of $67.80 per fortnight (for a single Age Pensioner) continues to be paid.
Then, for those seniors who return to Australia and start an Age Pension, they must stay in Australia for two years before travelling overseas again or may face the cancellation of their pension.
The six-month impact
The next important timing point for permanent Australian residents is at six-months after departing Australia. Once you’ve been out of Australia for 26 weeks, you’re considered to have left ‘permanently’.
Centrelink is reluctant to finance seniors who choose to live permanently in other countries or travel the world long term.
Your Age Pension payment rate could be cut significantly at 26 weeks. And the same reductions apply to Age Pensioners who inform Centrelink that they’re moving to live permanently in another country.
There’s more to the story
However, seniors who have lived in Australia as permanent residents for at least 35 years between age 16 and their Age Pension age are not impacted by this living-outside-of-Australia rule.
For those with less than 35 years in Australia after reaching 16, your Age Pension payment could be reduced. The Age Pension payment rate is reduced pro rata based on the working age period in Australia compared with 35 years.
Consider Sam, for instance. He left Australia as a young adult to see the world. After 21 years living and working in Europe, Sam returns to Australia to settle down. He was born in Australia in 1950 and thus has an Age Pension age of 65 years. Sam was away for 21 years, but he still worked 28 years in Australia.
This means that Centrelink could cut Sam’s Age Pension by 20%. Sam qualifies for 28/35, that is, 80% of the Age Pension payable within Australia.
What does this mean?
In summary, age pensioners can take a holiday or even an extended world tour, and not seriously impact their payments. But if you’re out of Australia for more than 26 weeks then your Age Pension payments could be reduced dramatically.
Having said that, there are some other rules to be aware of. For instance, different rules apply to age pensioners who were permanently living outside of Australia on July 1, 2014. In addition, a number of countries provide benefits for former Australian residents who retire to countries that have social security agreements with Australia.
The bottom line is this: Australian age pensioners thinking about travelling long-term or moving overseas need to check with Centrelink to find out what impact it will have on their pension.
Christine Hopper is the Director of Financial Care Services, an independent financial advisor.
Financial Care Services is focused on mature people considering a change of lifestyle including retirement and particularly new living arrangements in: retirement lifestyle community villages; granny flats; supported or assisted living; and Commonwealth regulated aged care. She can be contacted through https://financialcareservices.com.au.
Christine talks to Centrelink as a customer receiving a Carers Allowance and on behalf of clients. She understands the range of Department of Veteran Affairs and Centrelink income support benefits, their relevant means tests and eligibility conditions. She’s an actuary who also holds a Bachelor of Science, a Diploma of Financial Planning and a Certificate of Theology.