Work and pensions can mix

There are options and incentives for people who choose to return to the workforce after retirement.

By Angelo Lombardo - 3 min read

A little about Angelo

As a Member Solutions Consultant at Russell Investments, Angelo Lombardo understands all the ins and outs of super and retirement legislation, and loves to answer questions and help members.

The beauty of retirement is that how you spend your time is really up to you. You may take up new hobbies or travel, spend more time with friends and family, or simply relax—OR you may even choose to dip your toes back into the workforce.

A recent survey by the National Seniors’ Association found that 17 per cent of retirees had re-entered paid work after retiring, and another 19 per cent would consider it.¹

Working can be social and fun, and it can help you to stay physically and mentally active. It gives you opportunities to use your skills and learn new ones, keep connected to the community, and feel like you are contributing to society. And as the saying goes: “If you love your job, you’ll never work a day in your life”.

Returning to paid employment also has an obvious effect on your finances. Working can boost your income and help you to keep saving for your future, but it can also affect your government Age Pension entitlement.

Around half of Australian retirees rely on a government pension as their main source of income, with superannuation coming in at second, Australian Bureau of Statistics figures show.² Many Australians are justifiably hesitant to jeopardise their pension payments by returning to work, but there are incentives designed to keep older people working—so you may be able to have the best of both worlds.

The impact on the Age Pension

If you receive the Age Pension and do return to work, you must inform Services Australia within 14 days. Your income levels go into determining how much Age Pension you will receive.

To encourage seniors on the Age Pension to do paid work, Centrelink applies a ‘Work Bonus’ to income earned from full-time, part-time, seasonal, casual or self-employed work. The Work Bonus acts like a credit account, called a ‘Work Bonus Balance’.

The Age Pension entitlement is subject to an Income and Assets Test. The Work Bonus reduces the amount of eligible income included in the Income test. That is, the Work Bonus allows you to earn up to a certain amount before it impacts your Age Pension entitlement.

From 1 December 2022 to 31 December 2023, the Work Bonus Balance is capped at $11,800 a year thanks to a short-term extension that was introduced in November 2022. From 1 January 2024, the cap amount will revert to $7,800.

A boost for your super

Working after retirement also benefits your superannuation balance.

Firstly, earning employment income means you won’t need to dip into as much of your superannuation savings to fund your living expenses.

Secondly, your super fund can accept super guarantee (SG) payments from your employer no matter what your age, so you can continue to top up your balance for as long as you’re working.

Up to age 75, your super fund can receive all types of contribution, including before and after-tax contributions, as well as SG payments from your employer (from the 2022-23 financial year onwards). After that age, your fund can only accept SG payments from your employer, and downsizer contributions you may make after selling your home, but generally not other types of contributions.

Your choice

Working after retirement might not be for everyone but it’s good to know that there are options and incentives that mean you won’t be penalised if you do choose to return to the workforce. After all, retirement looks different for everyone and how you spend your time is ultimately your own personal choice.

17%1 the proportion of retirees who re-entered the workforce after retirement 19%1 the proportion of retirees who would consider returning to work 75 years the cut off age for making personal before and after-tax contributions into super. Your fund can still accept mandated employer contributions and downsizer payments. $11,800 Work Bonus Balance amount from 1 December 2022 to 31 December 2023 $7,800 Work Bonus Balance amount from 1 January 2024

 

1. Older Australians’ perspectives on working after retirement, June 2022, National Seniors Australia

2. Retirement and Retirement Intentions, 8 May 2020, Australia, Australian Bureau of Statistics

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