How does Australia’s pension system stack up?

Worldwide we are living longer, and population ageing is picking up pace. In 2020 the number of people aged 60 and older outnumbered children under 5 years. In 2022 around one in 10 people were aged 65 or older. This is expected to reach one in six in 2050 and one in four or 25% by 2100.

With the proportion of elderly increasing so 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.

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[1]. 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, in October 2023[2], the normal maximum fortnightly rates for an eligible single person are:

Maximum basic rate$1002.50
Maximum Pension Supplement$80.10
Energy Supplement$14.10
Total per fortnight$1096.70

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 that assists pensioners with their household energy costs.

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

Apart from meeting the residence requirement, 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 your and your partner’s (if applicable) income, including financial assets. The asset test assesses the value of your and your partner’s assets (excluding your principal home if certain requirements are met). The test that results in lower payment is then applied to your pension.

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

Australia is typically ranked amongst the best in the world for age pension plans, trailing just behind the Netherlands and Denmark[3]. In the Netherlands, for example, the age pension is paid from the age of 66 and 4 months (increasing to 67 in 2024)[4] and is based on 70 percent of the minimum wage for single people.

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 percent 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.

The sooner you seek personal advice from a financial professional, the more likely you are to help ensure you have adequate income to fund your desired retirement lifestyle.



[3] “Ranked: The Best and Worst Pension Plans, by Country” Visual Capitalist (1 August 2020)


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