"Is the fortnightly pension drawn from my pension fund classified as income which will effect my Age Pension entitlement?"

In most cases no. There are some different types of pensions and some older style pensions that have different rules, for example they may have been established prior to 1st of January 2015 and if the other criteria is met, they could be grandfathered for Centrelink purposes which the income does have a different treatment and the amount you draw can affect your Age Pension.

For this blog, I am just referring to a normal account-based pension that are offered on the market today. Again, it is important to get advice specific to your situation as there are many terms for account-based pensions such as “income streams” or “pension funds” and it is important you are referring to the correct product.

So, an account-based pension will be assed by Centrelink in two parts. Part 1 – they will just assess the market value of the total account against your asset test. Noting the value of your account-based pension is generally updated every six months - usually in February and August if it is linked correctly in your Centrelink account. Part 2 – they will then assess the account-based pension based on its value to earn a “deemed” amount of income. The deemed amount of income is calculated based on a variable percentage set by Centrelink. It is irrespective of how much the account actually earns and also irrespective of how much you draw from your account! So, you don’t need to worry about what amount you take each fortnight. If for example though you take $100,000 out as an ad-hoc payment – Centrelink do need to know where the money has gone (i.e. if you have purchased a car).

Put simply imagine your account-based pension is like a bank account that you take $1,000 per week out of to spend on living expenses, Centrelink don’t classify this $1,000 per week you are taking as an income, all it is doing is reducing the asset value of your bank balance.