Australian retirees with substantial savings could qualify for higher Centrelink Age Pension payments by changing how part of their retirement wealth is invested. A growing number of older Australians are exploring lifetime annuities, which provide regular income while receiving favourable treatment under government means-testing rules.
The strategy is particularly relevant for retirees with assets approaching $1 million who may receive only a small part pension or miss out on payments altogether.
Under Centrelink’s special assessment rules, certain lifetime annuities have just 60% of their purchase price counted towards the assets test initially, potentially increasing pension eligibility without requiring retirees to give away their savings.
However, the financial benefits depend on personal circumstances, and the arrangement comes with important restrictions.
What Is the 60% Rule?
Centrelink normally assesses financial assets when determining whether someone qualifies for the Age Pension.
These assets can include bank accounts, shares, investment properties and superannuation balances held by people who have reached Age Pension age.
However, qualifying lifetime income streams purchased under the rules introduced on 1 July 2019 receive different treatment.
Only 60% of the purchase price is generally assessed under the assets test until the annuitant reaches their life expectancy, or for at least five years.
After that period, the assessable amount generally falls to 30%.
For example, someone purchasing a qualifying lifetime annuity for $100,000 would initially have only $60,000 counted as an asset.
That represents a $40,000 reduction in assessable assets, even though the money remains invested in an income-producing retirement product.
Importantly, the reduction to 30% does not automatically happen at age 85 for everyone. The timing depends on the applicable life-expectancy rules.
Pension Limits
The Age Pension is assessed using both income and assets tests, with Centrelink applying whichever produces the lower entitlement.
For retirees who own their homes, asset limits are particularly important because the principal residence is generally excluded from the assets test.
The October 2026 figures cited in the report put the upper asset limits for receiving a part pension at $745,750 for a single homeowner and $1,121,000 for a homeowner couple.
These thresholds are subject to periodic adjustments and should be checked against current Services Australia rates.
Retirees whose assessable wealth sits near the relevant limit may find that purchasing an eligible annuity changes their pension entitlement.
However, reducing assessable assets does not guarantee a payment increase because the income test must also be satisfied.
How It Works
Consider a homeowner couple with $1 million in assessable financial assets.
If they use $200,000 to purchase a qualifying lifetime annuity, Centrelink would generally count $120,000 of that annuity under the initial 60% assessment.
Their remaining assets would total $800,000, assuming no other changes.
This would reduce their combined assessable assets from $1 million to approximately $920,000.
Depending on their other income and circumstances, the reduction could improve their Age Pension entitlement.
Under the standard assets-test taper, pension payments generally decrease by $3 per fortnight for every $1,000 of assessable assets above the applicable threshold.
An $80,000 reduction could therefore make a meaningful difference for retirees whose payments are restricted by the assets test.
The actual increase would depend on the couple’s complete Centrelink assessment.
Annuities Gain Popularity
Lifetime annuities are attracting greater attention as Australia’s population ages and more people begin drawing income from superannuation.
Unlike ordinary investment accounts, lifetime annuities are designed to provide payments for the remainder of a person’s life.
This can help retirees manage the risk of outliving their savings.
Australian retirement income provider Challenger has reported stronger demand for annuity products.
According to its latest results discussed in October 2026, domestic annuity sales increased 17% to $4.9 billion.
Fixed-term annuity sales reportedly rose 19%, while lifetime annuity sales increased 13%.
The figures indicate growing interest in retirement products offering predictable income rather than relying entirely on investment market performance.
Income Assessment
Although lifetime annuities can receive favourable assets-test treatment, retirees must also consider how Centrelink assesses the income they provide.
For qualifying lifetime income streams, 60% of the annuity payment is generally counted under the Age Pension income test.
This means the arrangement does not completely remove the investment from Centrelink calculations.
For example, if an eligible annuity pays $10,000 annually, approximately $6,000 may be treated as assessable income.
This income could affect pension eligibility, particularly for retirees who already receive substantial earnings from other sources.
The final outcome depends on whether the income test or assets test produces the lower pension payment.
Inheritance Concerns
One important disadvantage of lifetime annuities is reduced access to invested capital.
When retirees purchase an annuity, they exchange a lump sum for contractual income payments.
Unlike money held in a bank account, the investment may not be freely withdrawn whenever needed.
Melbourne financial adviser Billy Norman told Yahoo Finance Australia that he generally limits annuity exposure to around 20% to 25% of a client’s assets.
This approach can leave other savings available for unexpected expenses and changing financial needs.
Inheritance planning also deserves attention.
Some modern annuity products include death benefits or withdrawal protections, allowing beneficiaries to receive money if the investor dies earlier than expected.
However, these features vary between products and may affect income payments.
Retirees should examine the contract carefully rather than assume their original investment will automatically pass to family members.
Who Benefits?
The strategy may be particularly relevant to Australians who have reached Age Pension age, own their homes and hold enough financial assets to restrict their Centrelink entitlement.
It may also appeal to people seeking dependable retirement income alongside superannuation investments.
However, buying an annuity solely to increase Centrelink payments may not deliver the best overall financial outcome.
Investment flexibility, inflation protection, fees, death benefits and long-term income needs must all be considered.
Retirees should also understand that the 60% concession applies only to qualifying products, not every annuity available in Australia.
What Retirees Should Know
Australia’s retirement income market is changing as older households look for ways to balance financial security with access to government support.
For some retirees, lifetime annuities can achieve two objectives: provide regular income and reduce the assets counted by Centrelink.
The biggest potential advantage comes from the 60% assets-test treatment, which can improve Age Pension eligibility for qualifying retirees.
Before making a decision, Australians should confirm the latest pension thresholds with Services Australia and consider obtaining licensed financial advice.
A carefully selected annuity may strengthen retirement income, but its value depends on the entire retirement plan, not simply the size of a possible Centrelink payment increase.
