Top Up of the Pension Bonus

Last amended: 9 July 2014

What is the top up?

For PBS claims lodged on or after 1 January 2008, a top up of the pension bonus may be payable in certain circumstances.

Intent of the top up

This provision helps a person who claims pension and their bonus before their retirement finances are finalised, or when they have leave payments still being paid to them by their employer. Their pension rate and, therefore, their bonus payment may be affected under the pension means test and be lower initially than it otherwise would have been.

Reduction in income/assets in 13 week

Where the person's rate of designated pension increases due to a reduction in the income or assets within 13 weeks after the date of grant of their pension bonus, the person may be eligible for a top up of their pension bonus. The reduction in income or assets which results in the pension increase may be due to a pensioner notifying a change in circumstances, a departmentally initiated review or an automatic process such as a refresh of share or managed investment prices, an exchange rate variation or a deeming rate reduction. A top up does not apply where the pension rate has increased solely because of indexation of the pension rates or limits.

Top up in circumstances specified in a legislative instrument

The Commission has specified under section 45UIC VEA that a top up will also apply if a person would have been eligible for a top up except for the date of effect rules that limit arrears of pension. An example would be where the person provides an incorrect amount of income on their pension claim but the correction was not advised within 13 weeks from the date of grant. T — he date of effect is the day of notification and no arrears of pension are paid. The person can, however, receive a pension bonus top up, based on the difference between the bonus amount paid and what would have been paid on the da — te of pension grant if their pension rate had been correct on that day.     

No claims required for top up

There is no formal claim for a top up. A person should notify the Department of an event or change in circumstances that may affect their pension entitlement as per their standard obligations. If they are eligible for a top up, the amount will be calculated and paid without the need for a further claim.

Top ups payable to estate

Should a person who is eligible for a top up die before the amount has been paid, then the top up is payable to the legal personal representative of the person.

Top ups do not apply to pension bonus bereavement payment

If a claim is made for pension bonus bereavement payment, no top up is payable as there is no ongoing pension payment for which a rate increase determination can be made. If the surviving partner has claimed a pension and bonus i — n their own right, then the top up provision would apply to them.    

Calculation of top up

The amount of the top up is the difference between the bonus that was paid, and the bonus that would have been payable, if the calculation was based on the highest rate of designated pension paid to the person in the first 13 week period.

The highest rate of designated pension paid within the 13 week period includes pension increases not directly associated with the reduction of income or asset value (for example, increases arising through a later statutory indexation) provided that a pension increase, due to a reduction in income or asset value, occurs within the 13 week period.

Top up where there is a change in marital status during the accrual period

Should the person's marital status change during the overall qualifying period, the bonus calculation is apportioned to reflect the periods of different marital status during the period of deferral. The same principle is applied for top ups in these cases. The highest rate of pension in the 13 weeks from the date of pension grant will also be applied as a percentage of the maximum annual rate payable.

Example- top ups and change in marital status during accrual period

Mrs Lyons accrues a bonus for 5 years, with 3 years as a single person and 2 years as a partnered person. She is partnered when she claims PBS. The adjusted percentage for her original bonus is calculated at 80%. In the first 13 weeks, her retirement finances are settled and she has a highest rate of pension equivalent to 85% of the maximum annual rate of pension. The top up amount is worked out by applying 85% to the PBS calculation instead of 80%.

Members of a couple who separate within 13 weeks of pension grant

To work out whether a top up applies after members of a couple separate, each individual's personal income/assets after separation should be compared with their share of the combined income/assets, prior to separation.

• Where there is no difference between these amounts, the person will not be considered eligible for a top up as there has been no reduction in the level of their income and assets.
• Where there is a reduction, compare the pension rate at grant and the highest pension rate as percentages of the applicable maximum pension rates. This is necessary to check if the pension rate only increased because of the change from partnered to single rate, i.e. the reduction in income/assets alone may not have been enough to cause an increase in pension rate. If the percentage of maximum pension rate decreases or stays the same, then no top up is payable.

Example – top ups and couple separates within 13 weeks of grant

Lloyd and Ruby Green have accrued 2 years in the PBS when they claimed pension and the bonus. They are income tested and have combined income of $400 per fortnight (so their share of combined income is $200 each). The pension rate at grant was 92.493% of the maximum pension rate payable.

In the first 13 weeks after pension grant, they separate and Lloyd now has $120 p/f income and Ruby has $270 p/f income. Lloyd starts to receive 100% of the maximum single rate pension. Ruby starts to receive 89.734% of the maximum single rate of pension.

As Ruby's income did not reduce, there is no top up is payable to her. For Lloyd, the top up is the difference between the pension bonus payable based on 100% of the maximum pension rate and the pension bonus amount originally paid.

Top ups – single person becomes partnered within 13 weeks of pension grant

The same basic rules that apply to separations occur to partnering or re-partnering, comparing personal income and assets before the person became a member of a couple, with their share of combined income/assets after they became partnered to ensure a reduction has occurred. Then compare the percentage of maximum rate of partnered pension they now receive with the percentage of maximum single rate they previously received to establish if a top up is payable.