Pension indexation simplified

It’s important to understand which rules are currently applied to index pensions.

Pension indexation simplified

There is much talk about how pensions should be indexed and it’s important to understand which rules are currently applied to increase payment rates.

Currently the Age Pension, Disability Support Pension, Service Pension and Carer Payment are indexed twice a year, in March and September.

Payment rates are indexed to the rise in Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI), whichever is greater. The CPI measures changes in the prices of a fixed ‘basket’ of goods and services and is used to ensure the real value of pensions. The PBLCI measures the effect changes in prices of out-of-pocket living expenses which are experienced by those households where the main source of income is a government payment and is designed to check whether their disposable incomes have kept pace with price changes.

After indexation is applied, the payment rate is then benchmarked against a percentage of the Male Total Average Weekly Earnings (MTAWE). The single rate of pension equals 27.7 per cent of the MTAWE and the couple combined rate is equal to 41.76 per cent. If, once initial indexation is applied the rate is less than the benchmark of the MTAWE, the payment rate will be lifted to equal the agreed percentage.

The benchmarking of pensions to the MTAWE is to ensure pensioners maintain a certain standard of living, relative to the rest of the population.


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    12th May 2014
    Debbie - The simple fact is that the current pension indexation arrangement was designed to ensure that pensioners did not fall behind in the vastly improved financial position of the average employed Australian over the years.

    Abbott and Hockey now plan to ensure that pensioners will be nearly $300 a fortnight worse off by 2030, than they would be under the current arrangements.

    This is going to happen slowly and stealthily, so that people won't even be aware that their income is falling behind in relative terms.

    We might see some real justice if corporate income increases were readjusted to the same level as pensions.
    12th May 2014
    Spot on with your last sentence. The irony is that the only controls are to be on lower and middle income Australians and pensioners whilst the top end is not touched....again. I found it rather sickening of Tony Abbott talking about a freeze on politicians' wages. What he forgot to mention is that federal politicians had their salaries DOUBLED in a 2 year period thanks to the same bogus 'Independent remuneration Tribunal' which the corporate sector uses to justify its obscene rorts as well.

    Perhaps double all pensions and then freeze increases of CEOs, Boards and politicians until they lift their own freeze. I can live with that.
    Pass the Ductape
    13th May 2014
    I very much doubt Hockey 'forgot to mention' their salaries had doubled mick. It would have been a deliberate omission. Politicians have no problems lying straight to our face at the best of times because they all know we can do little to stop them once the ball is rolling. Similarly, whilst it might look good on paper to say that they have decided not to accept a pay freeze for 12 months, in the scheme of things we all know it means diddly squat. If you can't manage on $4 to $500,000 a year there's something wrong, so a few extra thousand isn't going to worry them..... and in any case, once the 12 months are up, they'll get their pay rise which I guarantee will include any amount missed out on previously. It's all just one big rort! WE know it - THEY know it and there's nothing we can do about it.
    13th May 2014
    Duct..Plus Interest and Depreciation or Loss and Suffrage,..Whichever is the Greater..
    13th May 2014
    I feel like sending poor Joe a food parcel of 2 Minute Noodles, Black and Gold Wheat Bix and a couple of cartons of Cupboard Milk !!
    12th May 2014
    My friend nearly 69 will be retiring this year. She is lucky enough to own her own small unit and will have an income from her super and that of her late husband of around $450pw. She is aware she is more fortunate than many others and does not want to seem greedy but wonders if she will qualify for a part pension or at least a concession card because it for health reasons that she has to leave work. We have both tried to understand the Centerlink charts but find it difficult to understand. She has a modest amount of savings which seems to fall well below what she is allowed, but with the income from Super it appears she will not qualify. Does anyone know if she would or would not qualify. Again she knows she is in a far better position than most and appreciates that fact.
    12th May 2014

    I would suggest to you that this forum is not the place (by a long way) to inform yourself or your friend about her eligibility for benefits.
    Over many years of dealing with them, I have received nothing but informed help by going to an office of Centrelink and laying out all the facts of one's situation.
    She will walk out of the office knowing (officially) just what her entitlements (if any) are.
    12th May 2014
    Hi Bangles, Very important that your friend calls 13 2300 ASAP and request an appointment with a FIS (Financial Information Service) officer. He or she will explore all her options and explain them to her. One important matter to look at is possible PBS (Pension Bonus Scheme) entitlement if she turned age pension age before 20 Sept 2009 AND continued to meet the 'work test' as required under the scheme. The PBS has closed but there is still a tiny window of opportunity that runs out in a few weeks time. The FIS officer will explain everything. Good luck.
    12th May 2014
    Hi Bangles
    As long as your single friend's assets are below $758,750 she would get the aged pension. h
    Her assets exclude her fully owned unit. Best she contacts a very good financial adviser to assist with her application to Centrelink. Look at the information supplied by Your Life Choices at the bottom of this page, especially Centrelink Asset Test
    12th May 2014
    Ian W, PM & Cabinet Secretary, Only gets $15,500 Dollars PER WEEK ...What The ??
    The Prime Min, Only gets $10,500 Dollars PER WEEK...Plus Perks and Shofar Driven Limo.. Etc.
    While The Poor Treasurer Only gets 6,000 Bucks Per Week,..Poor Sausage !! Now have a little bit of Sympathy You lot !! I don't know how they make Ends Meet ??? Let alone Copping a PAY FREEZE !!..Yeah Right !!
    12th May 2014
    Is.. Broken Promises.. the Politically Correct form of LYING ??
    12th May 2014
    If ever I'm in court and asked to Swear on the Bible,I will say "Swearing is VULGAR !! And I am a believer in Sumarianism..Therefor I will only take an Oath on a Stack of Complete and Unabridged Stone Tablets from 480BC !!"
    12th May 2014
    Is it time for pensioners and the baby boomers to show their voting strength?
    Let the government know what they are up against before the next election.
    Time the government looked at their own waste and whether we are getting value add for dollars invested on behalf of the people they represent.
    It is always easy to cut pensions and add taxes at the lower end payments, but all good businesses look at the quality of services for the dollar spent and the value add to the bottom line. It is now time for the government to look at the value taxpayers receive from government investments. Whilst they are doing this they might also look at stopping politicians pensions until age 70.
    The Pensioner Party looks okay to me, any thoughts?
    By the way if the Government looked at the value add to society from aged pensioners they might get a shock just how much of their free time is given for the common good.
    Oh! I forgot politicians are economists and don't consider the good of the people represented unless it means re-election.
    12th May 2014
    If Pensioners Stopped all the Child Minding while the Parents worked and all the Voluntary Work, The Government would be on their Knees Last Week Mick !!
    13th May 2014
    You didn't mention TPI Pension. It is quite a bit higher than service pension.....or was.
    13th May 2014
    Did I hear that Right ?? They are abolishing the Pension Supplement ??..I'lll STARVE !!
    14th May 2014
    abbot is no christen he is the devil in disguise and hocky sits there playing his hocky stick .2 true blue blugers if ever ive seen well now for lets wait for the rejection from both houses have a nice day.
    14th May 2014
    I think Pinocchio and The Stealth Bomber will survive Its only a Repetitious Pantomime You know !!
    15th May 2014
    Well interesting!! The polls showed before the last election that the majority of seniors supported Abbott and his cronies. Wonder how many here voted for them.

    Anyway the change to the way pensions are to be indexed will mean that the real value of the pension will fall. In other words you will be unable to buy as much with your pension. But then we all have to 'do the heavy lifting', unless, of course, you have a trust, have negative gearing, earn enough that you can employ a tax accountant to ensure you pay no or minimal tax, or are a mate of the Government, Rhinehart, Murdoch, large company, mining company, are eligible for the diesel rebate, etc. The list does go on.

    Abbott would have to be the PM who has most blatantly lied to the electorate before an election.

    Remember these promises
    No change to pensions
    No cuts to health
    No cuts to education
    We are not shutting any Medicare locals
    No ones personal income tax will go up
    No cuts to the ABC or SBS
    And so it goes on.

    He played the Australian electorate for suckers, and the voters fell for it. The Liberal Party when in Government since the 1980's has demonised anyone who is on a low income, forced them to bear the consequences of the gifts to their mates and the Australian people continue to allow it to happen. Glibly accepting three word slogans.

    This Government has no social or moral conscience. Just consider the comments being made now
    going to he doctor will mean missing 2 coffees
    A packet of cigarettes will pay for three visits to the doctor. A visit to the doctor is less than the price of two schooners.
    How crass and demeaning.
    15th May 2014
    Yes I just heard the last hour and a Half of it before 6pm !! I heard a Liberal Witch Screaming in the Background as a Labour Lady was trying to be heard above the Cackle !!.. And We Pay that Rabble ?? And I would LEEERVE to know where He gets those Cheap Ciggys ??
    9th Jun 2014
    Mr Hockey recently thundered 'The age of entitlement is over'. But what about the entitlement Federal Parliamentarians have of free regular overseas trips, with their spouses on some trumped up excuse like 'to study the breeding habits of the sub arctic mouse'.

    Mr. Hockey has been silent about this taxpayer funded 'entitlement' that is given to a select few.

    We are not trumpeted by Government about who is taking these junkets and how such taxpayer funded holiday helps for better Government.

    I was an almost rusted on conservative voter until this hypocrisy arose but no more. The cynic in me suggests that the Labour Party would not want to remove this 'snouts in the trough' selfishness.

    Just remember Mr. Abbott and Mr. Hockey, this is going to come back and bite you.
    9th Jun 2014
    Bitten AZZES don't worry them !! They have Covered Their Future !!...
    Now I'm orf to study the Sex life of the Red Water Beetle !!
    13th Mar 2017
    I really appreciate the receipt every fortnight of my Age Pension. I can manage on this quite well and an extra $20.80 will be very welcome. Maybe the secret to surviving on an Age Pension is to be debt-free? I wish the whingers would stop complaining - let's look at other countries where Social Services are not so generous. The UK for instance. And don't forget the good ol' USA. I think we're very lucky to live in such a wonderful country as Australia and while I don't have much in the way of material riches, I don't envy anyone for what they have. I have a very small nest egg for which I receive interest of a very minimal sum each month so the Age Pension is pretty much my sole income. I've worked hard all my adult life too, so don't be so irritating with attitudes of self-entitlement. Please stop complaining and be a bit more appreciative. Try living in Russia.
    13th Mar 2017
    Too Bloody COLD !!
    I'll try India ! :-) :-)

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