Indexation of Age Pension Payments

The maximum rate of the Age Pension payment is indexed twice per year, on 20th March and 20th September.  With the most recent round of increases to payments made last month, the following is a timely summary of the current figures.  We also take a look at the methodology employed to maintain the relative value of payments over time, and some other notable recent changes.

CURRENT RATES AND THRESHOLDS

Following indexation on 20th September, the full fortnightly rate of the Age Pension payment (inclusive of the Pension Supplement and Energy Supplement) increased as follows:

Age Pension Payment (Per Fortnight)

Circumstances Previous Rate Increase Current Rate
Single $1,064.00 $32.70 $1,096.70
Partnered (each) $802.00 $24.70 $826.70

As a result of these increased rates of payment, the effective cut-off threshold to receive a part rate of Age Pension payment has also increased, as follows:

Assets Test

Circumstances Previous Threshold Effective Increase Current Threshold
Single, Homeowner $656,500 $11,000 $667,500
Single, Non-Homeowner $898,500 $11,000 $909,500
Couple, Homeowner $986,500 $16,500 $1,003,000
Couple, Non-Homeowner $1,228,500 $16,500 $1,245,000
Illness Separated Couple, Homeowner $1,161,000 $22,000 $1,183,000
Illness Separated Couple, Non-Homeowner $1,403,000 $22,000 $1,425,000

Income Test (Per Fortnight)

Circumstances Previous Threshold Effective Increase Current Threshold
Single $2,332.00 $65.40 $2,397.40
Couple $2,568.00 $98.80 $2,666.80
Illness-Separated Couple $4,616.00 $130.80 $4,746.80

INDEXATION OF PAYMENTS

Indexation of Age Pension payments is applied to maintain both the buying power and the relative value of pension payments over time.  The methods of indexation used to measure and apply these factors are the Consumer Price Index (CPI), Pensioner and Beneficiary Living Cost Index (PBLCI), and the Male Total Average Weekly Earnings (MTAWE).

WHAT ARE CPI, PBLCI, AND MTAWE?

CPI is a measure of the increase in the cost of a basket of goods and services across a wide range of sectors over time and is used as a key measure of inflation in the broader economy.

PBLCI more specifically measures the effect of price changes on the out-of-pocket living expenses of households that rely on income support payments, including the Age Pension.

MTAWE is a measure of the average salary income and is included in calculations to ensure the rate of payment of the Age Pension keeps pace with community living standards.

The calculation of these measures is administered by the Australian Bureau of Statistics (ABS).

HOW INDEXATION IS APPLIED

Twice a year, on 20th March and 20th September, the greater percentage factor of increase in CPI and PBLCI is applied as an increase to the rate of Age Pension payments.  Data used to calculate this increase is based on annual figures from the end of previous quarter, that is to say the increase in payments applied on 20th September was based on annual data from the end of the June quarter.

These rates of increase are then subject to a further test of being required to meet a minimum percentage of MTAWE, where the payment rate for a combined couple must be no lower than 41.76% of this measure.  The single payment rate of Age Pension is then set at 66.33% of payment rate for a combined couple rate.

As a result of the above method of indexation, there is an inherent lag between movements in CPI, PBLCI, and MTAWE data and the subsequent adjustment to Age Pension payment rates.

OTHER NOTABLE CHANGES

In addition to the regular periodic increase to Age Pension payments, there were notable changes to other Centrelink payments effective 20th September.

Rent Assistance (Per Fortnight)

The maximum rate of Rent Assistance payments was increased in line with indexation, with an additional 15% increase to payments applied.  As rent assistance is paid in addition to income support payments, including the Age Pension, this may provide a meaningful further increase to income.

Circumstances Previous Rate Increase Current Rate
Single $157.20 $27.60 $184.80
Single, Sharer $104.80 $18.40 $123.20
Couple $148.00 $26.00 $174.00
Partnered, Illness-Separated $148.00 $26.00 $174.00

Jobseeker Payment (Per Fortnight)

The full rate of the Jobseeker Payment has also seen payments increase by a further amount of $40 per fortnight, in addition to indexation.

Circumstances Previous Rate Increase Current Rate
Single, 22+, no children $693.10 $56.10 $749.20
Single, 22+, children $745.20 $57.30 $802.50
Single, 55+, after 9 months $745.20 $57.30 $802.50
Partnered (each) $631.20 $54.80 $686.00
Single, principal carer of child, exempt from activity test $949.30 $20.90 $970.20

Parenting Payment (Single)

There was also a significant change to the Parenting Payment, which came into effect from 20th September.  While the rate of the Parenting Payment increased in line with the above changes to the Jobseeker Payment, eligibility was also significantly extended for single parents.

Previously, eligibility for the Parenting Payment (Single) ceased once your youngest child turned 8 years of age.  This limit has now increased to 14 years of age.

As with all things Centrelink related, the specific rules of qualification and assessment of different types of income and assets can be more complex than they may first seem and are subject to regular change.

If you wish to discuss your eligibility for the Age Pension or other Centrelink payment, please contact your adviser direct, or contact the office to arrange a time to meet and discuss.