Nearly three-quarters of Australian retirees will receive a ‘pay rise’ on 20 September when the Age Pension is next indexed. This indexation occurs twice a year, on 20 March and 20 September. It is the method by which the payment rates of the Age Pension are kept ‘real’ in terms of inflation, cost of living and movements in wages.
The three key components of indexation are:
- Consumer Price Index (CPI)
- Pensioner Beneficiary Living Cost Index (PBLCI)
- Male Total Average Weekly Earnings (MTAWE)
By keeping up to date with this data, we can fairly accurately predict the indexation weeks before it comes through. Based upon the latest metrics, our calculations suggest a 3.2% increase.
Let’s look at each of the above components of Age Pension indexation to explain how this works.
Consumer Price Index (CPI)
This is a measurement of selected consumer prices over the past month, six months and year. The increase that is used for September indexation is the same for both CPI and PBLCI, the six months change between December 2022 – June 2023. During this time the CPI rose by 2.2%.
Pensioner Beneficiary Living Cost Index (PBLCI)
Living Cost Indexes (LCIs) measures the price change of goods and services and its effect on living expenses of selected household types. The PBLCI measures the living costs for Age Pensioners and other ‘government transfer’ recipient households, i.e. households that source most of their income from government pensions. Over the indexation period (December 2022 – June 2023) the PBLCI rose by 3.2%.
Male Total Average Weekly Earnings (MTAWE)
This index measures the six-monthly movement in the average weekly ordinary time earnings of full-time adults, seasonally adjusted. Essentially a couple’s full Age Pension amount must be at least 41.76% of MTAWE. Age Pension rates have actually grown faster than MTAWE over recent years and this measure hasn’t impacted Age Pension indexation for 14 years.
So you can now see how these sums work. The PBLCI, at 3.2% is higher than the CPI at 2.2%, so it is the main index upon which rates will be benchmarked.
September 2023 Age Pension increases
The Federal Government have confirmed the new payment rates from 20 September 2023 for recipients of the Age Pension, Disability Support Pension, and Carer Payments. Singles can expect an increase of $32.70 a fortnight and couples can expect an increase of $24.70 a fortnight.
|Per fortnight||Current – Single||Current – Couple combined||20 September 2023 – Single||20 September 2023 – Couple combined|
|Maximum basic rate||$971.50||$1464.60||$1002.50||$1511.40|
|Maximum Pension supplement||$78.40||$118.20||$80.10||$120.80|
Will other payments rise?
Generally speaking, September 20 only sees increases to the base rates through indexation. Deeming Rates are frozen until June 2024, so these will not change. Other supplements could also be adjusted.
With rentals rising by about 10% year-on-year, there certainly was a case to be made that Age Pensioners who rent are those most in need of some extra support and the Commonwealth Rental Assistance payment has been reviewed with singles set to receive an increase of $27.60 per fortnight at the maximum payment rate while couples will receive an increase of $52.00 per fortnight at the maximum payment rate.
|Maximum Payment||Current Amount||20 September 2023 Amount||Increases|
|Single per fortnight||$157.20||$184.80||$27.60|
|Couple per fortnight||$104.80||$123.20||$18.40|
|Rent Threshold||Current Amount||20 September 2023 Amount||Increases|
|Single per fortnight||$140.40||$143.40||$3.00|
|Couple per fortnight||$227.40||$232.40||$5.00|
|Rent Ceiling||Current Amount||20 September 2023 Amount||Increases|
|Single per fortnight||$350.00||$389.80||$39.80|
|Couple per fortnight||$424.74||$464.40||$39.66|
If you would like to check your current Age Pension eligibility, you can do so using Retirement Essentials free Age Pension Eligibility Calculator. If you would like to learn more about ways of maximising your own entitlements, then talking with one of our consultants in a scheduled appointment will allow you to ask all your questions and share any concerns.
Are you ready for a pay increase?
Will this increase help you to juggle bills more successfully? Or does an extra $31 (singles) or $47 (couples) barely scratch the surface when it comes to managing household expenses? We’d love to hear how you are managing.
Originally published August 17th 2023. Updated September 7th 2023.