Hundreds of people who work beyond retirement age in return for a pension bonus worth up to $32,000 are dying before they get the benefit.

The work-till-you-drop policy has saved the Federal Government tens of millions of dollars in pension payments but left it severely embarrassed. 

This is because the spouses of elderly workers have been prevented from claiming the pension bonus owed to their dead husband or wife. 

Bureaucrats have told a Senate estimates committee that every year 460 elderly people who opted to keep working beyond retirement age died before they received their bonus. 

"The minister was very concerned about people who had lost a partner and had not received the bonus they might have been relying on," Dr Nick Hartland of Aged Support told the Senate committee. 

"The sad fact about this is that 460 people have died without getting the benefit," he said. 

Community Services Minister Mal Brough is so concerned about the failure of the scheme to deliver to elderly people he will change the law. From January 1 next year elderly Australians who sign up to the pension bonus scheme will be able to have any bonus they accrue before they die transferred to their spouse. 

Elderly Australians on the scheme who die before that date will not be covered. 

Relatives of single pensioners will be unable to benefit. 

The bonus will only be transferred to a deceased person's surviving spouse, the committee was told. 

Around 63,000 Australians are estimated to be taking part in the pension bonus scheme. 

To qualify you must have reached retirement age (65 for men and 60-65 for women) but work 960 hours per year. 

People who work beyond retirement age must register for the scheme when they reach retirement age and lodge a claim for the bonus within 13 weeks of ceasing to work. 

For each year the pension is deferred the Government pays 9.4 per cent of the annual pension, up to five years. The maximum bonus is worth $32,000.

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