The Australian Age Pension is reviewed, or indexed, twice a year, with payments adjusted on March 20 and September 20.
A small increase is usually made to both the Maximum Benefit Rate (base rate of the Age Pension) as well as the Age Pension supplement which combine to make up the amount of Age Pension you receive.
The exception to this regular adjustment occurred in 2020, which was the first time since 1996 there was no increase. And there’s a reason for this.
It’s because the rate of the Age Pension and pension supplement is closely tied to two key economic indicators – the Consumer Price Index (CPI) and a ‘basket’ of goods which is called the Pensioner and Beneficiary Living Cost Index (PBLCI).
Here’s how it works.
A decision on indexation is ruled by whichever is the greater of the movement in the CPI or the PBLCI. The increased pension is then ‘benchmarked’ against a percentage of Male Total Average Weekly Earnings (MTAWE). The benchmark rates are 27.7% for singles and 41.76% for couples. Such benchmarking is an attempt to keep the base rate of the Age Pension relative to the average earnings. The pension supplement is separately indexed against the CPI only.
In September 2020, with the initial onset of the Covid pandemic, both major indices went down and so there was no increase to the Age Pension. There were, of course, special Covid relief payments to older Australians during 2020, but no change was made to the base rate of the Age Pension.
The December 2021 quarter saw a 1.3% increase in the CPI, and a year-on-year increase of 3.5%. Since then, supply chain difficulties and workforce shortages have resulted in a marked increase in the price of groceries, fuel and pharmaceutical goods, in particular.
So it would seem, as night follows day, that the combination of an increased December quarter CPI and strong pressure on the pension ‘basket’ will ensure that the Age Pension and supplement will rise on March 20 this year.
That said, the big question is, by how much?
That’s a much harder thing to project. The most recent indexation, in September 2021, meant that for singles the base rate increased fortnightly by $13.90 and the supplement by 90c whilst for couples the increases were $10.50 and 70c for each member of the couple.
Consumer prices are currently increasing far faster than they were in the June quarter last year (the quarter which most affected the September 2021 indexation). This means that an expectation of even higher Age Pension increases than in September 2021 is fair and logical.
But in a year with a federal election and continuing pandemic pressures, anything could happen. Watch this space.
What do you think?
Do you believe the Age Pension will be indexed upwards in March this year? And if so, by how much?
If you are currently living on a full Age Pension, do you believe it is sufficient to cover your household outgoings? Or are prices rising far too quickly for your fortnightly payments to keep up?
Don’t forget Retirement Essentials always reports on any changes to Age Pension entitlements as soon as they are announced. And at any time you can check your entitlements, pension rates and supplements by visiting the Age Pension Entitlements Calculator.
Definitely not enough to live on, once you take out rent or site fees, there isn’t much left to pay living expenses
it should be increased to the $750 per week.Tthis is what is needed for essential expenses, these days. I pay 2/3rds of my pension in rent, which does not leave me enough to survive and pay all other essentials. I have relied on my meager super to prop my income and a few casual jobs to survive and pay all the bills. If it was raised to 750 / week then a lot of pensioners could completely retire from the work force opening up more jobs for the younger people.
I was widower bringing up my children and did not enter the work force until ten years ago. Thus I have no substantial super.
I understand that the federal retirement fund is still very healthy.(unless the government has been spending on other things?) and that there is enough funds to do this for those who do not have a big superfund. I hope we get a significant rain this year.
Of course a pension rise is required, I do not think it has ever been sufficient to live on.
Maybe we should gear our percentage increases to the same as government employees.
The major problem the Government has is that there are too many baby-boomers now qualifying for the pension.
Too bad so many survived Covid. It doesn’t matter what party is in power, there is always an excuse to screw over the pensioner.
I find myself in the same predicament as a lot of others my age. Not enough Super to live on and a failed Marriage left me without a house. The majority of my pension goes to pay rent. What’s left is to pay other bills supported by a small Super payment that will not last forever.
I am sorry to say this but there is no politician in this current bunch I would vote for. I will get my name marked off the roll and put the same thing on the voting sheet we are provided with as the politicians give to the voters, nothing.
To William,
I understand your frustration, I look at elections as voting in, the lesser of two evils. There is more at stake then just the pension, there is Medicare, doctors bulk billing, A National Integrity Commission which is needed to investigate allegations and expose corruption in the federal government and public sector. If you opt out of voting you will get back exactly what you are giving to the politicians NOTHING. Add least vote to get in an NIC and make them sweat.