HomeCentrelink – Services AustraliaAge PensionIs indexation failing age pensioners?

Is indexation failing age pensioners?

Is the Age Pension keeping up with the real world?

The Age Pension is indexed twice a year on 20 March and 20 September, and every time there is an increase the government of the day pats itself on the back. 

But do we need to radically rethink how the Age Pension is calculated and recognise real-world increases to support older Australians?

Let’s look at some of the figures. 

The Age Pension increase is matched to whichever is highest of the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI).

Pensioners were awarded an increase of $19.60 per fortnight for a single person and $29.40 for a married couple on 20 March 2024, based on a CPI increase of 1.8 per cent.

Wrong basket

The CPI is measured by pricing a fixed ‘basket’ of goods each quarter and the PBCLI measures the cost of living experienced by pensioner and beneficiary households. For example, the CPI puts more weighting on education costs than the PBLCI as they probably aren’t so important in Age Pension households. 

But are we even putting the right things in those ‘baskets’? Once upon a time, indexation covered mortgage payments, now it just covers the initial cost of buying a house. 

When mortgage interest rates were excluded from the CPI in the 1990s, mortgage rates were relatively steady and weren’t really an issue for the public. 

However, you’d have to be living under a rock not to notice that with increasing housing costs, mortgage stress is impacting all levels of Australia, not just first homeowners.

It’s generally assumed that older Australians own their homes outright, but many more Aussies are hitting retirement age still with a mortgage or are in rental properties. 

According to the Australian Institute of Health and Welfare, there has been a general decline in the proportion of households owning their own home without a mortgage and increases in households with a mortgage and in private rental agreements.

Rent increases

And rent increases are clearly outstripping the CPI. Across the combined capital cities in Australia rent has increased by 17 per cent over the past 12 months, according to figures in a PropTrack rental affordability report. Perth has risen by 67 per cent in four years.

Even the government is ambivalent about the CPI’s accuracy for measuring household costs, saying: “The CPI is often used to measure changes in the cost of living, but it is not an ideal indicator of this.”

There is also a lag between real-time increases and when the data is used and published to set the CPI. That isn’t so bad in a time of general stability, but in times of high price volatility, such as the COVID crisis and ever-increasing energy costs, it will never keep up. The lag time is estimated to be about six months. 

For example, while energy prices increased by almost 29 per cent from June 2023 in some states, in comparison, the annual CPI increase in the June 2023 quarter was 6 per cent. 

Food prices

Another relevant comparison on a national scale is that the Age Pension was indexed for a half-yearly increase of 3.2 per cent in September 2023 but, according to the ABC, food prices rose by 7.5 per cent in the year to August 2023.

Another glaring problem with tying the Age Pension to indexation is that the Age Pension is only indexed twice a year, but the CPI changes monthly, so essentially pensioners are missing out on five possible increases. 

The monthly Consumer Price Index (CPI) indicator rose 3.4 per cent in the 12 months to February 2024, according to the latest data from the Australian Bureau of Statistics (ABS).

Do you think the Age Pension indexation should change? What system would you suggest? Why not share your opinion in the comments section below?

Also read: Centrelink Q&A: is it possible to get two pensions?

Jan Fisher
Jan Fisherhttp://www.yourlifechoices.com.au/author/JanFisher
Accomplished journalist, feature writer and sub-editor with impressive knowledge of the retirement landscape, including retirement income, issues that affect Australians planning and living in retirement, and answering YLC members' Age Pension and Centrelink questions. She has also developed a passion for travel and lifestyle writing and is fast becoming a supermarket savings 'guru'.


  1. Well to be fair of course indexation needs to change for all the reasons raised in the article.
    Needs to reflect prices paid for things most pensioners use.
    And increases need to be applied quarterly not biannually.
    Also should be paid as a flat increase based on the single pension rate to every pensioner which would gradually lower the increasingly large gap between the single rate of pension and each member of a couple. This notion that couples share many things and so need less pension is rubbish in today’s world where everyone leads their own lives.

  2. Why not introduce the way you get payed in the Netherlands, AOW ( the national OLD age pension act)? Much fairer for everyone and not “mean tested”, so less complicated as well and not possible to be dishonest.!!! Everyone contributes during their working life even the same age for woman that couldn’t work any longer, because of family commitments or can’t afford too high day care fees in Australia. The age will be now in 2024, 67 years.

    • Australia used to have something like that and we all collected the same amount from 65 onwards. But about forty years ago it was abolished and the money in the fund was taken by the government and spent.
      They then introduced means tested pensions and anything else they could think up to reduce pension eligibility and soon after introduced compulsory superannuation which morphed into mainly a tax dodge for the very well off.
      There is no fairness in the current superannuation/pension system as the majority of benefits go to the rich. In fact their super tax concessions cost the government more than it would to pay them a pension.

  3. Like most pensioners we do have cause to struggle from time to time, however, we reside in a village, pay rent, pay for power, and live reasonably well. We knew when we retired it would not be the same as when we worked, but, we are surviving. Of course we would like more pension – but – where does it end? It is up to suppliers of food, petrol, power and other needs to look at their profit margins – I believe ( as many others ) that Governments have allowed businesses to race ahead and increase inflation, so people, instead of protesting about things out of our control, protest to your MP – remember, it is you that put them there.

  4. The CPI isn’t a very good indication as to whether we should get a reasonable increase in our pensions.

    The benchmark against the Total Average Weekly Male Earnings ‘should be’ increased from the paltry 41.7% for couples per fortnight to 50% (a more reasonable amount). The single payment should increase to 70% of the couple rate.

    Rent assistance rose by $3.40, but my landlord will increase my rent by 10% ($25) per week, which, to me, is exorbitant. I have no way to challenge this increase, as I’ve tried in the past. The total increase I received was $23 per fortnight, so where does the extra $27 come from? My food? – no way!.

    Is there any mechanism to lobby the parliamentarians to change the 41.7 & 66.33% to a more reasonable 50 & 70%? I’ve been saying this for many years, and it’s fallen on very deaf ears – 8 federal MPs (moved areas).

  5. On another subject altogether is NSW Housing.
    How do we lobby for more rental properties in areas of very high demand, like the area I live in. It’s outside the Sydney metropolitan area (approx 6 hours drive south).

    I’ve been on the list for coming up to 8 years, and possibly have another 3 years to wait. Their priority housing list is ‘supposed to be’ 2 – 5 years!

    If my rent is going up by the 10% mentioned in my other post, I’ll be in the possible unenviable position of being homeless, and with a disability, it’s getting extremely hard to find a property within my budget that can cater for my needs without major works having to be done (ramp to front & back door, and inside big enough to be able to use a walker without bumping into furniture).

  6. The aged pension is insufficient and has consistently gone backwards. Council Rates, Insurances, food, transport, all utilities and health care have all increased dramatically. The belief that a couple live at a lower cost to two singles makes no sense at all. It does however make sense to divorce and stay living together for two singles pensions.

    Is there any wonder that the rate of deaths of old people has taken a steep increase in the last few years. Covid can be blamed for some, but in spite of improved health offerings, after several years of declining death rates, we’re now seeing an increase. Could this come down to more and more pensioners having to live below the poverty level?

    It seems more older Australians can’t afford water, electricity, food, health care and the basics of life every Australian should be able to experience in their later years.

    The Australian Prime Minister recently stated that something needed to be done for low wage earners and people dependent on government allowances, but specifically excluded aged pensioners saying the current system looks after them.

    Just goes to show how little politicians really know about the 4.2M Australians over the age of 65. There seems to be a total ignorance that most of these 4.2M having a right to vote.

    • You are correct. I know a few widows and widowers home owners who have formed new relationships but maintain separate residences because if they were seen to move in together they would lose a big chunk of their pension. That leaves one empty residence that would otherwise have become available for rent or purchase in this housing shortage.
      The policy of paying people different rates of pension depending on who they live with is wrong, discriminatory and may well be illegal if tested in court.
      Rent assistance is another discriminatory practice as home owner’s don’t get any rates assistance. But then rent assistance is really all about helping landlords charge higher rents.

  7. My rent has increased a further $30 a week and is now $870 per week. We can’t afford it but there is nowhere else to go except the car or a tent. My Health cover has just gone up $7 per month. My internet connection has just gone up $7 per month. A schooner of beer is now $9. I filled my car up yesterday $110. Food ? what’s that. The pension increase is an insult.

  8. Mike
    Pension should be indexed quarterly using the average CPI & PBLCI for that period.
    calculations to be based on Fixed Costs, cost you have to pay such as:
    Insurance (household, Motor Vehicle etc
    Health Ins
    Rent, Corporate Body Fees, Rates
    Housekeeping food items only
    Personally Our fixed cost have increased by $1430 so far this year

  9. Living on a pension in rural Western Australia is becoming more difficult by the month. Every utility bill I received in March/April (2024) has all gone up and have outstripped the $19.40 increase. I owned my own home which I built in 1980, had no mortgage and life was reasonable. However, on January 7, 2016, wildfire destroyed the town and due said “heavy metal contaminats and asbestos possiblyfloating in the air”, home owners were not permitted to attend their homes for many months. Finally when restrictions were lifted people returned but faced another problem. It appears that Alcoa Australia didn’t follow building guidelines with their buffer zone which the quickly rectified and the Northern part of town included the buffer zone. Any homes destroyed were now not permissible to rebuild. It was cheaper to build new than rent when I moved to a new town. Thus I now had a mortgage but rates were at 2.25%. Enter Labor to run the country, everything rose. 75% of my pension goes to service utility bills leaving very little to purchase food, medication etc, etc. Many days I go without a meal so can purchase medication. No social life. Pensioners in Australia are living on scraps that fall of the table as the story goes.
    The CPI changes on a monthly basis and It’s my belief Pensioners would be better off on a monthly CPI increase rather than the system we have now. Pensioner’s need a fair go, paid taxes all our working life and no super in those days! It appears the government is trying to deplete the number in aged care homes and Pensioner’s alike by making us live below the poverty line.
    If able I would return to work but have injuries which prevent me doing so.
    Perhaps at the next election we can send the government a lesson that we are human beings and kick them out of office.

  10. Easy fix:- Universal Age Pension for everyone over Pension age, paid at a Tax Free Rate of:- 50% of the Total Average Weekly Male Earnings, with any excess taxable at the appropriate rate.
    It could be paid for by changing the way that Superannuation is taxed, remove the 15% tax during the Accrual Phase and tax the Pension Phase at the appropriate taxation rate.
    This would entail “Grandfathering” existing Super Pensions, and to adjust the percentage of Super Pension Taxed according to the percentage of years in “new system”.
    EG:- a person retires in 10 years, after 50 years contribution. Therefore they are taxed on 10/50 (20%) of their Super Pension for the rest of their lives (plus the tax free age pension).

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