Media Release by Senator the Hon Kay Patterson

Pension bonus provides more funds for retirement

Older Australians can receive a tax-free bonus of up to $27,666 over and above their age pension if they choose to stay longer in the workforce, the Minister for Family and Community Services, Senator Kay Patterson, said today.

The Pension Bonus Scheme pays a tax-free lump sum to registered members who defer claiming the age pension and continue to work, she said.

Senator Patterson said the Pension Bonus Scheme is an important program to encourage older Australians to consider staying in work for longer. The scheme complements the Australian Government’s recent announcement about incentives to encourage older Australians to invest wisely for their retirement.

Senator Patterson said that 60,000 people have registered with the Scheme since it began and in 2003 people received an average of more than $10,000, a rise of almost 40% over the average amount paid in 2002.

“This is a significant windfall for pensioners. It is a $10,000 tax-free lump sum payment when they do claim the age pension,” Senator Patterson said.

“The Pension Bonus Scheme provides a tax-free lump sum bonus that rewards and encourages older Australians who keep working.

“Where people are able and willing to do so, continuing to work can help them to retain social engagement and to boost their income, both leading up to and during their retirement,” she said.

“In order to be eligible for the scheme, a single person or at least one member of a couple must work a minimum of 960 hours a year. This equates to 20 hours a week over 48 weeks.”

The amount of the pension bonus is based on the rate of age pension payable at the time the pension is granted and the number of years a person is registered in the scheme. The maximum period over which a bonus can be accrued is five years.

After five years in the scheme, a registered member who is eligible to receive maximum age pension would, on current age pension rates, receive a tax-free bonus over and above their age pension of $27,666.10 for a single person or $23,095.80 for a partnered person.

“Almost one fifth of people over the age pension age who are working are registered in the Pension Bonus Scheme. In addition, about one third of people over age pension age are receiving the age pension while they work.”

Senator Patterson said that while the take-up rate was pleasing she wanted to encourage Australians approaching age pension age to consider their options because the social security system can reward people who work after the age pension age.

Centrelink’s specialised Financial Information Service (FIS) officers provide free and confidential information on financial, investment and social security issues. FIS Officers can provide information on the merits of continuing to work and claim a part-rate Age Pension, or registering in the Pension Bonus Scheme. An appointment can be made phoning Centrelink on 13 2300.