Having enough money to retire comfortably is a goal for many Australians. One way to save for retirement is through superannuation, a long-term savings plan that you can contribute to throughout your working life. But how much super can you have and still get the pension? This article will look at the rules around super balance and pension eligibility.
How Much Super Can I Have?
In Australia, there is no limit to the amount of superannuation you can have. However, there are limits on the amount of superannuation you can contribute each year, and these limits can vary depending on your age. For example, the current concessional contribution limit for those aged under 49 is $25,000, while those aged 49 and over can contribute up to $35,000.
Pension Eligibility & Super Balance
The amount of superannuation you have can affect your eligibility for the Age Pension. Depending on your age, you may be eligible for the Age Pension if your super balance is below a certain threshold. For example, if you are aged between 65 and 69, your super balance must be below $286,500 to be eligible for the Age Pension.
It is important to note that the amount of superannuation you have can also affect the amount of Age Pension you receive. If your super balance is above the eligibility threshold, you will receive a lower rate of Age Pension. For example, if you are aged over 66, your Age Pension may be reduced by up to $3.25 per fortnight for every $1,000 your super balance is higher than the threshold.
In summary, there is no limit to the amount of superannuation you can have, however, your super balance can affect your eligibility for the Age Pension. If you are aged over 65, it is important to check that your super balance is below the eligibility threshold to ensure you receive the maximum amount of Age Pension.
How Much Super Can I Have and Still Get the Pension
Retirement can be both an exciting and intimidating time, depending on how prepared a person is financially. Getting the maximum benefit from their superannuation is one of the most important factors to consider in creating a successful retirement plan. One therefore needs to understand how much superannuation they can have and still be eligible for a part or full age pension.
To be eligible for a full or part pension from the government, someone must meet certain assets and income test thresholds. If a person’s combined income and assets are above the limit, then they are ineligible for the pension. Their superannuation funds, however, are generally exempt from the assets test up to a certain amount. As of 1 July 2020 the asset exemption authority is a combined $453,000 for singles and $905,000 for couples.
Even if a person’s assets are below the asset limit and they are eligible to receive a pension, their superannuation balance may reduce the amount they receive. This is because excess superannuation is generally treated as a financial asset and is taken into account in the income test. For each extra dollar of superannuation, someone on the pension would have their payment reduced by 50 cents. This “taper rate” reduces the amount of pension received by someone with a superannuation balance above $1.6 million for singles, and $2.4 million for couples.
The government also provides the Low Income Super Tax Offset (LISTO) to help low-income earners reduce their tax on super contributions up to $500. This offset is designed to help those earning less than $37,000 reduce the tax they pay, while simultaneously encouraging people to save for their retirement.
Retirement planning is different for everyone, so the best idea is to get advice on the specific circumstances of each individual. Understanding the income and asset limits, as well as the taper rate, will help people plan for their retirement and get the maximum benefit from their superannuation.
References
1. “Exempt asset limits for the Pension”, Department of Human Services. 1 July 2020, www.servicesaustralia.gov.au/individuals/services/centrelink/exempt-asset-limits-for-the-pension
2. “Low Income Super Tax Offset”, Australian Taxation Office. 26 June 2020, www.ato.gov.au/Individuals/Super/Super-savings/Low-Income-Superannuation-Tax-Offset/
