One of the most common questions I hear as an aged care financial planner is: “Will my pension change?” The short answer is: yes, it can – sometimes for the better. Here’s what you need to know about how your Age Pension may be affected by decisions you make when entering aged care.
Understanding Means-Tested Pensions
If you receive a means-tested payment like the Age Pension, Centrelink assesses your assets and income to determine your eligibility and payment rate. When you move into aged care, the way you fund your care – especially how you pay for your accommodation – can influence this calculation so it is important to understand all your options.
What Is the Accommodation Payment?
When entering aged care, you will be asked to pay an accommodation payment (also known as a RAD – Refundable Accommodation Deposit). The good news is that this lump sum is exempt from Centrelink’s asset and income tests, which means it won’t reduce your Age Pension. This is a very important part of financial planning – because structuring your aged care funding wisely can help you preserve or even increase your pension.
Illness-Separated Couples Can Receive More
If you are part of a couple and one or both of you enter aged care, you may be assessed as an illness-separated couple. This means Centrelink recognises that your living costs have increased due to separation caused by medical need. In many cases, this leads to a higher rate of Age Pension being paid to each of you, helping with the added costs of care and living separately.
Aged Care Can Make You Eligible
Here’s something most people don’t realise: some people who previously didn’t qualify for the pension may become eligible after moving into aged care. This often happens because large lump sums (like the RAD) are not counted as assets, effectively lowering your assessable means. For example, someone who owns a home and has moderate financial assets might be ineligible for the Age Pension – but once part of their assets are used to pay the RAD, they may fall below the pension threshold and qualify for some or even full pension benefits.
Why Advice Matters
Making decisions about aged care funding without financial advice can have long-term consequences – not only on your cash flow but also on your pension entitlements, estate planning and family legacy. As a Melbourne-based aged care financial planner, I specialise in helping individuals and families navigate this complex system. Every situation is different, and what works for one person may not be suitable for another.
Comments 2
MY MOTHER HAS BEEN IN FULL TIME CARE FOR OVER TWO YEARS NOW STILL OWNS HER HOME PLUS SMALL ACRAGE AS MY YOUNGER BROTHER LIVES IN THE HOME HAS DONE FOR OVER 40 YEARS.
MY MOTHER HAS NOW LOST HER AGE PENSION CAN YOU GIVE ME ADVICE WHY THIS WOULD HAPPEN
Thanks for your query. Your brother may still be considered a protected person, however as your mother has been in aged care for 2 years, she is now considered a non-home owner. Her home now becomes an asset.
As her home is now an asset, she is no longer receiving a pension.