How does paid work impact on the Pension?

Key points:

• Going back to paid work may impact on your pension, depending on the number of hours you work
• If you work while on the Age Pension, you lose 50 cents for every dollar you make over $180
• The Work Bonus allows you to work more hours without your Age Pension payments being impacted

However, if you are receiving the Age Pension you may be concerned you will lose income if you start working again.

But there are ways to work while receiving the Age Pension where you can have both a regular income and get back into work.

If you haven’t retired yet but are concerned that this could be an issue that affects you, then you may benefit from a scheme that assists you to transition into retirement which will better prepare you for when you do fully retire.

So what happens if you re-enter the workforce?

The benefits of working in retirement

It is not uncommon for a retiree to return to the workforce. Many older people retire for a couple of years before deciding to work again because they have struggled with the transition to retirement or because they want to do something meaningful.

You can learn more about transitioning into retirement in our article, ‘Transitioning into your retirement life‘.

Going from a 9 – 5 job to having no activities to fill your day can lead to boredom and a loss of purpose in some retirees.

The workplace can also be a really vital place for making friendships and connecting with your local community and some retirees miss that particular aspect from their working life.

So it’s understandable you may want to work again to keep social, keep active in your community, or give yourself purpose again.

Some retirees also find working again can also help them find new interests before they retire on a permanent basis.

Work Bonus

If you want to work but don’t want to have your Age Pension impacted, you can utilise the Government’s Work Bonus Scheme.

This scheme allows you to work, if you want to and have the ability to, in a casual or part-time job.

It means you can work without your Age Pension being impacted up to a certain point.

Under the Work Bonus, up to $300 of your fortnightly income from your workplace will not be assessed by the Age Pension’s income test.

If you don’t use your fortnightly Work Bonus, it will be stored in your “Work Bonus Income Bank” where it accumulates for later use. This bank does not have a time limit and the amount does roll over every year, however, there is a maximum accrual amount of $7,800.

This accrual system can be beneficial for retirees on the Pension who participate in irregular or seasonal work.

For example, say you only earn $150 dollars over a fortnightly period, the other $150 dollars you would still have left to earn without impacting your Pension would be stored into your Work Bonus Income Bank for you to use later if need be.

If you end up working more hours in another week, then your Work Bonus Income Bank balance will come into effect and how much you have “saved up” will be able to minimise your assessable income.

You don’t have to worry about applying for the Work Bonus, as Services Australia will make sure the scheme works if you meet the right requirements. Your only responsibility is to make sure you correctly notify Services Australia of your income.

Keep in mind that the Work Bonus operates on top of the income test amount for the Age Pension, which is currently $180 per fortnight for a single person and $320 per fortnight for a couple combined.

Moving to a part Pension

If you decide to work more days a week, you will likely be transitioned to a part Pension, as you are earning too much to get the full Pension.

Since the Age Pension is income tested, you lose 50 cents for every dollar you make over $180 per fortnight.

The more you work, the less Pension you will receive from Services Australia.

If you are in a couple, this income test amount increases to 50 cents for every dollar over $320 per fortnight.

Be mindful that if you work enough to make over $2,155.20 within a fortnight, your Pension for that period will be cut off. However, this cut off can be a little higher if you receive the Work Bonus.

For a couple, this cut off point over a fortnight is a combined $3,297.60.

Before retiring

If you’re not yet retired or haven’t reached the Age Pension age, but want to transition into your retirement more smoothly, you may benefit from the Government’s Transition To Retirement (TTR) scheme.

This is for people aged 55 to 60 that are getting close to retirement but are still working.

Under the scheme, the Government allows you to “top up” your income with your super, while you reduce the hours you work.

This can be a beneficial option for soon to be retirees as you are still able to receive contributions to your super while working but also prepare yourself for what retirement will be like.

It’s important to weigh up whether this is the best option for you as you are accessing your superannuation earlier than expected.

Talk to a financial advisor to find the best retirement and work option for you.

Are you thinking about re-entering the workforce after a brief retirement? Tell us in the comments below.

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Related content:

Transitioning into your retirement life
Finding purpose in your retirement
Seasonal job options for retirees