Non-accruing membership of the Pension Bonus Scheme (PBS) 065-07030020

Scenario: Julie's Age Pension qualification date is 1 May 2005. Julie is not employed. Julie's partner, Kevin's, Age Pension qualification date is 1 May 2006. Kevin works 30 hours per week.

A Pension Bonus period is accrued by both when both members of a couple are registered members of the scheme and at least 1 of them meets the work test.

Julie registers as a member of the PBS on 1 May 2005, however cannot accrue a bonus period based on Kevin's work until Kevin is eligible to register for the scheme on 1 May 2006.

For the period 1 May 2005 to 30 April 2006 Julie is a non-accruing member of the scheme. On 1 May 2006 Kevin registers as a member of the PBS and continues to work for 30 hours per week. Kevin's work accrues bonus periods for both parties.

If Kevin meets the work test up to 30 April 2008 both Kevin and Julie will have accrued 2 bonus periods, even though Julie has been a registered member for 3 years.

Scenario 1: Janeen has been a registered member of the PBS since 1 April 2005. On 1 April 2007 Janeen gives $20 000 to assist Janeen's grown-up child with a house deposit.

Janeen's membership of the scheme becomes non-accruing from 1 April 2007 until 31 March 2012. Janeen is unable to accrue any further bonus periods until the year commencing 1 April 2012.

The 2 bonus years that Janeen has accrued are 'saved'. Janeen may claim Age Pension and 2 years Pension Bonus at any time during the non-accruing period or up to 13 weeks from the end of the non-accruing period. If after the deprivation period ends (31 March 2012) Janeen continues to work and is under 75 years of age, Janeen could continue to accrue bonus periods.

Scenario 2: A non-accruing period due to gifting can also occur due to gifts made in the 5 years prior to the customer reaching Age Pension age. A 63 year old male customer gifts $35 000 on 2 March 2007.

The customer registers within 13 weeks of reaching Age Pension age and is a non-accruing member from Age Pension age to 1 March 2012.

Scenario: Nick has been a registered member of the PBS since 1 July 2005. Nick works a 20 hour week. On 1 January 2007, after accruing 1 ½ bonus years Nick becomes ill and is absent from work for 12 weeks.

The period 1 January 2007 - 25 March 2007 is a non-accruing period. The effect of the non-accruing period is to lengthen Nick's bonus period by 12 weeks. Instead of the bonus period finishing on 30 June 2007 it will finish on 22 September 2007, giving Nick an additional 12 weeks to meet the work test requirement of 960 hours per bonus year.

Discretion is allowed in deciding whether or not apply a non-accruing period. If, for example Nick had already worked 960 hours before becoming ill, the non-accruing period would not need to be applied.

If Nick was absent from work and in receipt of compensation or Carer Payment (CP) for the 12 week period the effect of the non-accruing period would be the same. The bonus period would be extended by 12 weeks, allowing additional time to meet the work test. However, in the case of compensation or receipt of CP, no discretion is allowed. A non-accruing period must be applied.

Scenario: Jack and Betty are partnered. Both work full-time. Jack is Age Pension age and registered for PBS, that is, Jack is a registered accruing member. Betty is under Age Pension age. After accruing 3 bonus periods Jack fails the work test and retires.

Betty is still under Age Pension age and continues to work full-time. Betty makes a statement to Services Australia of the intention to register for PBS (or had intended to register in the PBS before the PBS closed from 20 September 2009) in another 2 years when at Age Pension age.

The Department of Social Services (DSS) have advised that Jack should be treated as a non-accruing member under the Social Security Act 1991, section 92Q.(2).d until 19 September 2009.

Until 20 September 2009, Jack was able to claim the 3 bonus periods when Betty retired and claimed Age Pension, whether or not Betty registers for PBS and accrues bonus periods because, Jack is a member who is not a participant in the workforce, but whose partner, Betty:

• is a participant in the workforce, and
• is not a registered member of the PBS, or of the corresponding scheme under Part 111AB of the Veterans Entitlements Act, and
• intends to become a registered member of the PBS, or of the corresponding scheme under Part IIIAB of the Veterans Entitlement Act

Note: if Jack and Betty attend a service centre following Jack's retirement and they advise the Service Officer(s) that Betty is going to retire when at Age Pension age (that is, Betty does not intend to become a registered member of the PBS) Jack is not allowed to be a non-accruing member and cannot claim 3 bonus years later when Betty retires.

Note: after 20 September 2009 this reason can still be applied to customers but only for a period before 20 September 2009.

This non-accruing reason may benefit Jack by allowing Jack to become a non-accruing member and continue to defer claiming Age Pension until Betty retires, so that the Pension Bonus Payment (PBP) would not be affected by any earnings Betty had.

This interpretation of the legislation from DSS may be very beneficial to some customers. Please be aware of this scenario and assist customers accordingly.

The closure of the PBS to those not qualified for Age Pension before 20 September 2009 means that Jack can no longer remain as a non-accruing member of the PBS for this reason from 20 September 2009.

Generally, unless Jack is non-accruing for another reason, or recommences meeting the work test, needed to claim the Pension Bonus within 13 weeks of 20 September 2009.

If customers in this situation contact Services Australia, they should be referred immediately to the Financial Information Service (FIS) to discuss the options available to them.

Note: if Betty qualified for Age Pension before 20 September 2009 and continued to work Betty can register for the PBS. If this occurs, subject to meeting the scheme's requirements, Jack and Betty may both accrue Bonus periods in the future because of Betty's work.

Any PBS member who is 75 years or over is a post-75 member of the scheme. The work test is similar for post-75 members as for members under 75 years. To stay in the scheme, the post-75 member must continue to meet the work test.

All non-accruing periods that apply to members under 75 years also apply to members over 75 years. A post-75 member does not need to meet the work test during these non-accruing periods except when they are in a disposal preclusion period.

Post-75 members must meet the work test during any disposal preclusion period. Note: this is different for members under 75 years.

The new work-related leave measure introduced on 1 January 2008, where a customer can be counted as a non-accruing member while on work-related leave for up to 26 weeks, also applies to post-75 members. Therefore, post-75 members do not need to meet the work test during these periods.

Claims from post-75 members must be lodged within the 13 week period starting on the date the member failed the work test or within 13 weeks of the end of a non-accruing period due to work-related leave, compensation preclusion period or other allowed reason except for disposal preclusion as mentioned.

The change implemented from 1 January 2008, which allows late claims to be accepted in certain circumstances, also applies to post-75 members.

Tom registered for PBS within 13 weeks of reaching Age Pension age. Tom works full-time for a further 7 and a half years. Only the last 5 full year qualifying bonus periods can be used to determine Tom's PBP entitlements.

The fact that a customer can accrue more than 5 bonus year periods should not be confused with the fact that a customer can only have a maximum of 5 'qualifying bonus periods'.

In such a situation, if Tom has accrued more than 5 bonus periods and the last 1 is a part year bonus period, Tom's 'qualifying bonus period' can only be the last 5 full bonus years. In other words, the recent part year and the earlier full years are disregarded.

For information on when a claim should be lodged, see Initial contact by customers claiming Pension Bonus Payment (PBP).