The Pension System in Australia can be divided into 3 categories as below :
- Public Pensions
- Occupational Pensions
- Personal Pensions
Public Pensions:
Public Pensions are provided by the Government from its General Tax revenues and is on a non-contributory basis.
Public Pensions is by two Government Departments namely Department of Human Services (DHS) and Department of Veterans’ Affairs (DVA).
The Age Pension is provided to the elderly persons of age 65 and above (men and women). With effect from 2014, men and women both have been brought under the same age category of 65 and above.
It is paid to persons of 65 and above, who meet the Residence qualifications of being an Australian citizen for at least 10 years in total, with at least 5 years as one period or possess a qualifying residence exemption or of a woman who is widowed after marrying an Australian and who has lived in Australia for 104 weeks prior to the claim or a widow who is receiving Widow B pension or Widow allowance.
Such persons should also qualify in the Means Test Qualifications which includes an Income Test and an Assets Test.
The Pension rates are generally indexed twice a year – on 20th March and 20th September, to factor in the current living cost, based on inflationary trends.
As of September 20th 2014, the Base rate for Age Pension for Single (per fortnight) is fixed at $776.70, plus a supplement of $63.50 and Clean Energy Supplement (CES) at $14.10, totaling to $854.30.
Similarly, the base rate for Couple (for each person, per fortnight) works out to $585.50 + $47.90 + $10.60 totaling to $644 respectively.
The Clean Energy Supplement (CES), introduced on 20th March 2013, is a round-the-year payment done to assist eligible households with regard to any impact from the carbon price.
Work Bonus is an additional incentive for elderly who are pensioners but who choose to continue to work.
The Public Pension structure in Australia also has Disability support pension, Wife Pension, Widow B Pension, Carer Payment, DVA Service Pension, Income Support Supplement, War Widow’s Pension, Service Pension, Special Rate Disability Pension in addition to the Age Pension, wherever applicable.
Occupational Pensions:
Occupational Pensions work on a Defined Contribution (DC) system, which mandates a minimum contribution from the income earned from occupation, to a superannuation fund.
Australia made it compulsory from 1992, to mandatorily enroll under DC system for employees who age group falls between 17 and 70 and earning more than $450 AUD per month, subject to a yearly cap of $50000.
Australian Government matches the employee contribution by a factor of 1.5 up to $1000 AUD per year.
Personal Pensions:
Personal Pensions operate on a voluntary contribution by employees to the various Retirement Savings Accounts (RSAs) of their choice. Life Insurance Companies and Deposit-taking Institutions offer various RSAs which are of low cost in nature and work similar to Superannuation funds.
