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Retiring Overseas and the Australian Age Pension
Many Australian are attracted to spending all or part of their retirement offshore - perhaps to be closer to family or because cost of living differences mean that they can potentially have a much more relaxed and enjoyable lifestyle. It's not for everyone - you need to factor in the impact of prolonged absences from family and lifelong friends and you need some capital behind you - we do not support moving overseas if your sole income is the pension and you have no additional capital, except perhaps if you have access to good quality public health care. But one significant factor for many people considering the possibility however is whether the Australian Age pension would be payable, to them, entirely or partially, while overseas.
The Australian Age Pension can be paid overseas permanently, with some current estimates suggesting that more than 60,000 Australians are currently receiving their Age pension overseas. However, the rules in this area are both complicated and unclear in certain areas - particularly for current expatriates - and it is recommended that you seek advice from both Centrelink and financial advisors regarding your entitlements. Much depends upon the detail of your situation, and we have just tried to present a short summary below:
1. Entitlement to an Australian age pension is dependent upon applicants meeting both income and asset tests - with pension entitlements progressively reducing if an applicant's assets or income exceed specific levels. Obviously, there are no issues about self-funded individuals or couples retiring overseas - just make sure to check out how your income is assessed in your new home. Happily, most Asian countries do not (yet) tax income generated outside the country.
2. To qualify for an Age pension you must also have been an Australian resident for a total of 10 years, at least five of these in one continuous period. You must also be an Australian resident and in Australia on the day your claim is lodged, unless you are claiming under an International Social Security Agreement (see below).
3. As mentioned, you need to be a resident of Australia at the time the first claim for the age pension is made. Note that if you have been an expatriate ("former resident") and have been living overseas, the restriction means that you will need to remain in Australia for at least two years before you can leave and be paid overseas. In practice, many Australian expatriates return home at least two years prior to becoming eligible for an age pension - this ensures eligibility from a residency point of view and "should" mean the two-year restriction does not apply - although this needs to be confirmed.
4.When a person goes overseas their rate of Age Pension is paid according to their Australian Working Life Residence (AWLR) or years in Australia between the ages of 16 and Age Pension age. A person who has resided in Australia for 35 years between the ages of 16 and Age Pension will receive the full means tested rate, less any add-ons; while a person with less than 35 years will get a proportionate rate. For example, if you have lived in Australia for 10 years between the ages of 16 and age pension age, your proportion would be 10/35 multiplied by the normal income and asset tested rate of Age Pension.
Previously, this rate change did not occur untiil a pensioner had been outside Australia for 26 weeks. However, in the 2015 Budget the Government announced that some pensioners will now have their pension rate reduced if they are absent from Australia for more than 6 weeks. After 6 weeks absence from Australia, pensioners who have lived in Australia for less than 35 years will be paid a reduced rate of benefit proportionate to their Australian residency based on their AWLR . Pensioners with more than 35 years AWLR will not be affected. For more details see a recent announcement which indicates that the operative date for these changes will be January 1, 2017.
Alternatively, you can make a claim for a pension without returning to Australia, if you are living in a country with which Australia has an International Social Security Agreement.
Finally, one issue that many people overlook when considering retiring overseas is access to health care - international health insurance, particularly in retiree age groups, can be very expensive. And you cannot just rely upon going home to Australia when the need arises - if an emergency develops and you need to be evacuated to Australia at short notice it may cost more than $100,000 from some destinations. We view the need for international health insurance as an absolute necessity and frankly, if you can't afford cover, you need to reconsider leaving Australia.