5.6.1 Overview of the Pension Bonus Scheme
Last amended: 12 August 2022
What is the pension bonus?
The pension bonus is a once only, tax-free lump sum payable to a person who, on reaching pension age voluntarily defers retirement for at least one year. A person can accrue a maximum of 5 qualifying bonus periods, that is equivalent to 5 years. The bonus is calculated using a multiple of the annual rate of basic pension paid at the time of actual pension grant.
Closure of the scheme
The pension bonus scheme closed to people who have not reached pension age or qualifying age before 20 September 2009. People who were eligible before that date, but had not yet applied were able to register for the scheme until 1 July 2014. The scheme closed to new registrations from 1 July 2014. Existing members can remain in the scheme while they continue to meet the work requirements to accrue a pension bonus. The work bonus was introduced as an alternative to encourage workforce participation.
Rationale of the scheme
The pension bonus scheme provides incentive for older Australians to remain in the workforce and defer receipt of income support pension. The incentive is a non-taxable βone offβ lump sum amount payable if all eligibility criteria and rules are satisfied. There are two pension bonus schemes:
- the DVA scheme, and
- the Centrelink scheme.
The DVA scheme
The DVA scheme is accessible to people of pension or qualifying age who are eligible to receive:
By registering for the pension bonus scheme prior to 1 July 2014 and deferring pension for at least one full year, a bonus may be paid by DVA when a pension is granted. To be eligible for the bonus all requirements of the scheme must be met.
Deferring age pension through DVA
A Disability Compensation Payment recipient or their partner who would qualify for social security age pension and who has registered for the pension bonus scheme prior to 1 July 2014, may choose to defer their age pension and participate in the pension bonus scheme through DVA. The rules under social security law would apply. In certain circumstances a war widow(er) may be eligible for a bonus under the DVA scheme on the basis of having deferred the age pension at Centrelink.
Centrelink scheme
The Centrelink scheme is accessible to people of age pension age who are eligible to receive the age pension. Having deferred age pension for a minimum of a year, a bonus may be paid to the person when the age pension is granted.
Objectives of the scheme
The objectives of both schemes are identical. That is, to:
- increase labour market participation of people of pension age,
- increase the level of individual savings for retirement, and
- restrain growth in pension outlays.
These objectives will be met by offering a bonus to people willing to defer their pension by maintaining an attachment to the workforce through gainful employment and who have registered for the pension bonus scheme prior to 1 July 2014.
Key components of the DVA scheme
The key components of the scheme are as follows:
- a person has attained pension age/qualifying age,
- other relevant eligibility criteria for pension payable on the grounds of age are met,
- there has been no prior receipt of an income support pension or benefit (other than carer payment, carer service pension or income support supplement paid to a carer) since the person's special date of eligibility and before making a claim for the pension bonus,
- the income support pension (or, where a person has been eligible for more than one pension since reaching pension age, the pensions) must be deferred,
- the person has registered for the scheme prior to 1 July 2014,
- the person does not need to have pension payable in order to register,
- between at least one and up to five qualifying bonus periods may be accrued,
- the work test must be passed to accrue a bonus period,
- a minimum of 960 hours of gainful work be performed during a year,
- a minimum of two thirds (640 hours) of the gainful work must be performed within Australia,
- work outside Australia can be regarded as work in Australia if special circumstances are met,
- the rate of bonus is dependent on the number of accrued bonus periods and the person's annual rate of pension on grant of pension, and
- the person has a lodgment period within which they must claim a bonus (usually within 13 weeks of the end of the last bonus period).
Source URL: https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/56-pension-bonus-scheme/561-overview-pension-bonus-scheme