Pension Bonus Scheme

If you are of age pension age, but continue working, you can apply to Centrelink for the Pension Bonus Scheme. The Centrelink Pension Bonus Scheme is an incentive to stay in paid employment as long as possible (another carrot the government dangles around to get out of paying the aged pension.

The moment you become eligible for the aged pension, you should troop off immediately to Centrelink and register. Even if you are not sure that you will qualify for the benefit it doesn't cost money to put yourself on the list so it is an investment with a large upside and no downside.

The gist of it is, for every year that you work you collect bonus points that are redeemable on your retirement. Each year's bonus points entitle you to a tax free lump sum equal to 9.4% of the annual pension. The amounts paid for the pension vary each year and I don't see the point of constantly updating this site when the Centrelink Web site has all this stuff anyway.

For a single person, on a full pension, the tax free lump sum can accrue to over $22,000 after five years, for a couple that sum can be about $19,000 each after five years.

It can compensate to an extent for people who never saved any super when they were younger, several extra years in the work force and a bonus $40,000 could make the difference between comfort and cat food for some people.

You can accrue bonus points until you reach age 75, so if you register from age 65 and stay in work to age 75 you get a 94% bonus lump sum.

If only one partner still works (must be gainful employment for at least 960 hours a year, this is a fairly light working week of 18 hours a week), then this doesn't stop both partners registering for the scheme, so long as one partner works and neither partner claims a pension.

Once you have received a pension you are no longer entitled to be in the scheme. The Pension Bonus Scheme is intended to keep people in work longer, and is not intended to encourage people to go out of retirement.

You aren't forced to stay at work, if you register you can pull out any time and claim the age pension. If you have worked for less than one year after meeting the age pension age you don't get any bonus. My understanding is that Centrelink uses whole years, so 4.9 years is 4 years, or a 37.6% bonus. Try to hang in that extra couple of weeks if you can.

Asset and Income Testing for Pension Bonus Scheme

There is no up-front test for the scheme, they don't prevent you from registering however much assets you have, however they do ask about your assets (with the exception of your home).

When you start on the pension the usual income and asset tests apply. If your pension is reduced, your bonus is reduced. You get a bonus lump sum of 9.4% for each year you were registered. If the income and assets tests knock back your pension entitlements to zero, you get zero bonus (sorry!), if your pension is reduced to next to nothing, you get next to no bonus. The way it works is you get x% bonus on whatever you eventually get, it is a percentage bonus and not a dollar bonus. If you get the full pension however, the bonus can be substantial.

Accruing membership

You accrue points while you are:

Non-accruing membership occurs when:

When a non-accruing member, you don't accrue bonus points. When the non-accruing period ends you can immediately resume accruing bonus points.

Time limits

If you stop meeting the work test, or your income earning partner stops meeting the work test, you have 13 weeks to claim the bonus. If you fail to claim the bonus in that time it is reduced or forfeit.

If your working partner dies, you have 26 weeks to claim the age pension.

If you get sick, the sick time does not count as work time for the work test. If sick for 4 to 26 weeks continuously, you may be regarded as being in a "non-accruing" period. If you get better following that you can go back to work and start accruing your bonus. It would probably be better if you are unlikely to get better to claim the pension if you are sick for an extended period.

Non-transferability

The bonus goes only to you. You cannot leave your bonus points in your will. If you die your partner has 26 weeks to claim his or her pension and the bonus. If he or she doesn't, it is gone.