Michael Forer
Technical

Pension Bonus Scheme - only three weeks left to register

By Michael Forer

The Pension Bonus Scheme (PBS) will be closed to new entrants from 20 September 2009, so your clients only have three weeks left to register.

To register for the PBS you must first qualify for the Age Pension before 20 September 2009. Therefore, only men over the age of 65 and women over 63.5 years are eligible to register.

Note that you do not need to be eligible for the Age Pension at the time of registration. The pension bonus is calculated based on your Age Pension entitlement when you apply to receive the Age Pension for the first time.

What is the Pension Bonus Scheme?

The Pension Bonus is a lump-sum, non-taxable payment. The following payment rates are effective from 1 July 2009.

Years in the scheme Single—maximum rate Partnered (each)—maximum rate
1 year $1,392.60 $1,163.10
2 years $5,570.40 $4,652.40
3 years $12,533.30 $10,467.90
4 years $22,281.50 $18,609.60
5 years $34,814.80 $29,077.50

To meet the work requirements for the PBS, you need to complete at least 960 hours of paid work each year. You must meet the work requirements for at least one year to be eligible for the pension bonus.

Why is the Pension Bonus scheme closing?

The Government argued that the PBS was not well understood and failed to act as an incentive for mature age Australians to remain in the workforce. They believe that the vast majority of participants would have continued in the workforce in the absence of the scheme.

As announced in the May Budget, the PBS will be replaced with a new Work Bonus scheme whereby 50 per cent of the first $500 per fortnight of employment income will not count for income test purposes for people over Age Pension age.

To Register or Not?

Clients who are still working and who turn Age Pension age between now and 20 September and those who are already over Age Pension age but have failed to register should seriously consider registering for the scheme in the next three weeks.

Going forward, you will need to consider whether a client is better off applying for a part Age Pension and benefiting from the new Work Bonus scheme, or holding off and receiving the lump sum Pension Bonus Payment upon retirement.

However, unless a client is registered for the PBS prior to 20 September 2009, there will be no option to receive a lump sum Pension Bonus Payment. You must be a registered member of the Pension Bonus Scheme to be able to claim a Pension Bonus Payment when you eventually claim your Age Pension.

Registering now for the PBS will provide flexibility and opportunities that could greatly benefit your clients in the future. Failure to register before 20 September would be an opportunity lost for many of your clients.