How Does Australia's Pension Plan Stack Up?

One in six people will be over 65 years old by 2050. With the world's population ageing quickly, it is natural to think about how pension systems around the world will cope, particularly in Australia. Fortunately, Australia's three-component retirement income system means our age pension system is well-equipped to support older Australians now and well into the future.

Is Australia's age pension adequate for retirement?

Comparisons of age pensions around the world are generally made based on three key factors — adequacy, sustainability and integrity. The balancing act is tough, but essential for countries to get right. It is no use having an overly generous age pension if the current funding measures (typically tax revenue) aren't adequate to maintain the system long-term. Integrity is also critical, ensuring an age pension system adequately protects a country's older people.

What payment types are included in Australia's age pension?

Age pension rates in Australia are based on an income test, assets test and your relationship status. For example, the normal maximum fortnightly rates for an eligible single person are:


Maximum Basic Rate $860.60

Maximum Pension Supplement $69.60

Energy Supplement $14.10

Total $944.30


The Pension Supplement is an extra payment to help eligible retirees pay their utilities, phone, internet and medical expenses. Similarly, the energy supplement is an additional payment which assists pensioners with their household energy costs.

What are the means tests for Australia's age pension?

There are two tests to determine age pension eligibility in Australia — the income test and the asset test. The income test assesses all sources of you and your partner's (if applicable) income, including financial assets. The asset test assesses the value of you and your partner's assets (excluding your principal home).

How does Australia's age pension stack up against other countries?

Australia is typically ranked amongst the best in the world for age pensions, trailing just behind the Netherlands and Denmark. In the Netherlands, for example, the maximum age pension is 50 per cent of the minimum wage for couples, and 70 per cent of the minimum wage for single people. Denmark differs slightly, though their system is still adequate, providing pensioners with a minimum of 40 per cent of a person's average earnings along with support through the country's universal healthcare and housing benefits.

Despite the Netherlands and Denmark consistently holding the top spots for their respective age pension systems, Australia's age pension comes quite close. Australia is fortunate to have a stable, well-funded age pension system, with the maximum age pension equating to around 60 per cent of the national minimum wage.

Is Australia's age pension adequate for your desired retirement lifestyle?

When planning for your retirement, it is important to consider your desired retirement lifestyle and what this will cost. Your ongoing costs in retirement will be impacted not only by your day-to-day living expenses but also by the value of your assets and any outstanding debt, such as a mortgage.

Seeking tailored advice from a financial professional as you plan your retirement will ensure you have adequate income to fund your desired lifestyle. Get in touch with us, to see how we can help you on your way to retirement.

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