The full aged pension in Australia, with all entitlements, is currently worth $867 per fortnight. This equates to $22,542 per annum. To use a very simple point of comparison, the current annual return on a 12 month term deposit with the NAB is 2.4%. A client would need a deposit worth almost $940,000 to generate a guaranteed return of $22,542 per year.
Therefore, one way to look at it is that the existence of the aged pension constitutes a safety net for every Australian aged over 65 – and that safety net is the equivalent of an asset worth about $1 million.
For many people, that effective $1 million is the most valuable asset they may own. But strangely, some Australians do not realise that they are entitled to it. So it is imperative that SOAs recommend that clients make sure that they receive any and all pension monies to which they are entitled.
One of the reasons that people do not realise that they may qualify for the aged pension is that there are some technical elements of the means tests for the pension of which the client may not be aware. There are two means tests: one for assets and one for income.
Regarding the assets test in particular, some assets are not included in the calculation of assets used to decide eligibility for the pension. These include the family home (that is, the principal residence in which the potential pensioner resides), meaning that clients may live in a family home worth many millions of dollars and still qualify for some or all of the aged pension if their other assets do not exceed the limits.
Centrelink’s website has all the information that you need to decide whether and to what extent a client may be eligible for an aged pension. This site should be visited whenever assisting a client of eligible age. The SOA should then state whether or not the client is eligible for the aged pension (or any other benefit). In the case where we observed that an SOA had not stated that the client was eligible for the pension, the adviser had simply assumed that the client was aware of their entitlement. They weren’t, and this adviser made himself a client-for-life when he showed his client how she could access the partial aged pension.