The Age Pension is indexed twice a year, March and September, and benchmarked to whichever is higher of the Consumer Price Index (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI).
The CPI covers all Australians, but the PBLCI specifically measures changes in the cost of living experienced by pensioner and beneficiary households. It does this by giving different ‘weighting’ to the basket of goods and services sampled. For example, education is valued higher in the CPI than the PBLCI as it is assumed PBLCI households don’t have as much responsibility for these costs.
But is the system working?
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.”
Time lag
There is also a lag between real-time price increases and when the data is used and published to set the CPI. That can be particularly damaging in times of price volatility such as during COVID and ever-increasing energy costs. The lag can be up to six months.
Another problem is that interest payments on a mortgage were removed from the ‘basket’ of goods in the 1980s and replaced with the price paid on a house.
This wasn’t such an issue a decade or so ago when most retirees owned their own houses outright, but now more than half of retirees and older workers have a mortgage. With interest rates soaring last year, and interest rates indexed each month, while the Age Pension is only twice a year, the effect on many older Australians has been crushing.
It is expected the Age Pension will be indexed to just under 2 per cent for the March increase.
National Seniors (NS) chief executive Chris Grice says there is a case to rethink how the pension is indexed.
“We believe the pension should be indexed quarterly, especially for those reliant on the Age Pension and struggling to cover basic necessities such as food, fuel, electricity and rent. How often is as important as how much,” Mr Grice says.
National Seniors would also like to see more support for pensioners.
“The federal government should introduce a Pensioner Concession Card+ on top of the existing Pensioner Concession Card,” Mr Grice said.
“This targeted card would provide additional concessions and support to pensioners living in poverty.
“This would be a cost-effective way to deliver much-needed cost-of-living supports such as our proposed Seniors Dental Benefit Scheme.”
Time for rethink
National Seniors is currently conducting a campaign to establish a dental scheme for older Aussies, similar to the Child Dental Benefits Schedule, which covers part or the full cost of some basic dental care if the family is on certain Centrelink payments.
Mr Grice said as well as indexing the Age Pension quarterly, there should be a rethink on deeming.
“The government should continue the freeze on deeming rates for a further 12 months while inflation remains high,” he said.
“The deeming rate is set to lapse on 1 July 2024, affecting part-pensioners, Commonwealth Seniors Health Card holders and people who contribute to aged care costs.
“This time should be used to reset the deeming policy to create a fair and transparent deeming method.”
Do you think the Age Pension should be indexed more often? What would be your preferred schedule? Why not share your opinion in the comments section below?
Also read: Older Aussies howl down the expected Age Pension increase
I have been calling for quarterly indexation for years.
Also the way the increase is calculated needs to take more account of the cost of living increases that apply to most pensioners which can be substantially different to those applying to the wider community because of different spending habits.
Pensioners mostly spend money on essentials and are greatly affected when prices for those things shoot up, while price rises for discretionary spending have lesser impact.
I aree completely.
Retirees/Pensioners are not effected by toys, school needs, child/baby needs, streaming services and such items that impact younger couples.
We need a Pensioner Retiree CPI. This would need government officers actually speaking with us and not just Govt. personel talking amongst themselves. Maybe they could even talk to their parents or grandparents.
Steve O
Spot on, Steve! We should also aim to have a universal age pension which is not assets and means tested. That would make the system fair and save a lot of administration costs and headaches for pensioners who need to comply and report with the constantly changing rules of eligibility. The harder we have worked and saved the more taxes we paid and then we get penalised when it comes to retirement.
We pensioners can say and request anything we like but unless pensioners form a voting block, nothing will change.
All the gobbledy gook about indexation and all that crap is exactly that.
How would the pollies like to put up with all that bullshit in order to get their luxurious salaries?
and meanwhile as they are humming and haring whether we are worth more than they expect
us to struggle with.
The whole model is a joke. Insurance increases which don’t count in the assessment, Rates caps which have not been revisited in 20-years and runaway costs mean Pensioners are going backwards at speed. Other groups have been given larger increases due to the Cost of Living. Workers have been given tax cuts. Meanwhile pensioners are struggling to survive and being ignored. In 5 years time when someone identifies morbidity rates have increased because pensioners can’t afford heating / cooling, can’t afford medicine (the new caps actually mean most pensioners pay more), can’t afford healthcare and can’t afford to put healthy food on the table, there will be an outcry. Mark my words. Maybe it is all a plan to get rid of those without super (due to age or situation) and reduce government spending so we can give more to other countries as aid. Pity we have forgotten aid like charity begins at home.
It’s sad that politicians and bureaucrats treat Aged pensioners with so much contempt and complete lack of care. The situation would change rapidly if politicians were forced to live on the aged pension.
I would like to see a couple of the pollies give up their salary and live with a couple of pensioners for a few months, given a single pension to get by with, no flash cars, no using their credit cards, using cash only. Use public transport to go shopping better still walk to the supermarket and then carry all the shopping home. Go to the doctor and wait to be seen and pay the fee, then go to the chemist and pay for the prescription.
THE CPI IS A JOKE
NO WAY HAS INDEXATION ONLY GONE UP %5.2 FOR THE YEAR
iIF THAT IS TRUE WHY DID SINGLE PARENTS GET A %15 increase for the first 6 months and the unemployed get %6 percent for the first 6 months ‘PENSIONERS GOT %3.2 FOR THE FIRST 6 MONTHS
WHY ARE THE ELDERLY AND THE DISABLED AND CARERS TREATED AS WE ARE NO LONGER WANTED OR
SUPPORTED
AFTER ALL MORE PENSIONERS HAVE SUPPORTED THE GOVTS WITH TAXESC
WHAT HAVE THE UNEMPLOYED DONE EXCEPT BLUDGE OF WORKERS
SINGLE PARENTS ARE THE SAME
THEY COULD WORK IF THEY WANTED TO BUT THE ONLY JOB THEY WANT IS BABY BIRTHING AND WHY NOT
THEY GET PAID MORE THAN PENSIONERS FOR DOING NOTHING FOR ANYONE BUT THEMSELVES LIKE THE UNEMPLOYED
I think it’s fair to say the present system is broken and is incapable of implementing further change.
The present govt minister was too interested in bagging the previous govt. although they deserved it rather than sorting out the future and here we are with a dept that just function properly.
My wife and I have now been waiting over 4 months for an aged care pension assessment.
We are 78 years of age and my wife is in an Agedcare Home.
Our govt agedcare means test Assessment is now stacked up because the Centrelink income and assets assessment is frozen awaiting the pension assessment.
The next pension increase is a insult. Just under 2%? My next rent increase will be 20%. For years everyone from social service groups to the business community have been telling the government (both the LNP and Labor) the the age pension, Jobseeker and Disability support pensions are too low. They all refuse to listen. Would rather spend money on stupid submarines.
Yes it should be indexed quarterly, but then again I retired last October after working since 1969 and I am still waiting for the pension…..
The pensión is not enaught, life is very spensive I can’t live with this pension…