A part pension is a reduced Age Pension payment made to retirees who meet eligibility requirements but whose income or assets are above the threshold for a full pension. It ensures that retirees with moderate resources still receive some government support, while directing higher benefits to those with fewer assets and lower incomes.
The rate of part pension received depends on how much income and assets exceed the lower threshold, with payments gradually reducing until the upper cut-off limit is reached.
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The part pension is determined under the Age Pension means test, which applies both an income test and an assets test. Services Australia calculates eligibility under both tests, and the test resulting in the lower pension entitlement is applied. Pension payments taper down at fixed rates:
- Income test: payments reduce by 50 cents for every dollar above the income free area (singles) or 25 cents per dollar each (couples).
- Assets test: payments reduce by $3 per fortnight for every $1,000 of assets above the threshold.
Rates and thresholds are indexed regularly. Many retirees combine a part pension with superannuation income streams, investments, or part-time work.
Relevance
- Provides income support to retirees with modest savings
- Ensures fairness in the Age Pension system by targeting those most in need
- Helps retirees supplement their own retirement income without full reliance on government support
Applications
- Supporting retirees with superannuation balances that reduce but don’t eliminate pension eligibility
- Combining part pension with income from investments or part-time work
- Helping retirees maintain concession card eligibility, such as the Pensioner Concession Card
- Smoothing the transition between self-funded retirement and government support
Metrics
- Income and assets thresholds that determine part pension eligibility
- Number of Australians receiving part versus full Age Pension
- Rate of taper reductions applied to payments
- Proportion of retirees combining superannuation and part pension
Issues
- Complexity of rules may confuse retirees about eligibility
- Fluctuating investments can cause pension amounts to change frequently
- Crossing thresholds may significantly reduce payments
- Policy changes may shift eligibility, affecting retirement planning certainty
Example
A single retiree has $400,000 in superannuation and earns $250 per fortnight in deemed investment income. This is above the income free area but below the cut-off. Their Age Pension is reduced under the income test, and they receive a part pension, which supplements their super withdrawals.
