There are two chief sources of retirement income in Australia. These are:
- Superannuation: paid for through employment-related contributions.
- The age pension: funded by taxpayers and paid through the government.
Australian superannuation is funded by employers, who must pay a minimum of 9 percent of every employee's ordinary time earnings into a compulsory retirement fund.
The fund must be registered with and approved by the Australian Government. Some employers do this in addition to your pay and some will deduct this from your "remuneration package".
Over three-quarters of Australian workers have their superfunds in a balanced superannuation fund. This means two-thirds of their retirement money is invested in the world's stock markets.
Superannuation funds are not final-salary schemes, so your income when you retire is dependent on the performance of your funds, which is why many workers rebalance their funds, moving their money into less volatile investments, when they are nearing retirement.
In addition to your employer's 9 percent contributions, you are also free to add money to your fund.
For most people, superannuation supplements the Government's age pension and provides them with additional income in retirement.
The Age Pension
To qualify for an age pension in Australia, you usually need to have lived as a resident or citizen of Australia for at least 10 years.
Pension payments from the government, effective from 01 January 2010, are worth $17,469 per annum for single people, and $26,338 per annum for couples. Various other allowances may be available for the aged, such as utilities allowances.
Australian pensions are income and asset tested.
The Asset Test
If, in addition to their home, a single person has assets worth less than $178,000 (couple $252,500) they will get the full government pension. A sliding scale operates after this. A person loses $1.50 of age pension per fortnight ($39 annually) for every $1,000 of assets above the figure of $171,750 (couple $243,500).
The Income Test
Effective from 01 January 2010, if a single person's income (not including government age pension) is less than $142 per fortnight ($248 couples) they will qualify for the full age pension.
Income above these amounts reduces the pension payable by 50 cents in the dollar (single) or 25 cents in the dollar each (for couples).
To guarantee the level of income you require at retirement requires planning.
Holborn Assets has Australian advisers to help with your Pensions whilst you are an expatriate to ensure that you reach your desired retirement income.
Please talk to a qualified Holborn Assets adviser for more information.