The size of the September Age Pension increase has become clear with the release of the Pensioners and Beneficiaries Living Cost Index (PBLCI).
It followed hard on the heels of the June quarter Consumer Price Index (CPI) figures and the Reserve Banks’s fourth consecutive monthly rate rise. All indicators pointed to a sizeable pension increase to alleviate some of the burden on retirees struggling with rising living costs.
The Australian Bureau of Statistics’ Living Cost Indexes also showed the cost of living for employees and self-funded retirees rose 1.5 per cent in the second quarter.
Pensioners and beneficiaries faced a smaller 1.3 per cent rise because healthcare costs declined over the three-month period, in part because more consumers qualified for Pharmaceutical Benefits Scheme (PBS) subsidies, AAP reports.
Read: RBA rate rise risks leaving age pensioners behind
Over the 12 months to June, the cost of living for all groups rose by between 4.6 and 5.2 per cent, the ABS says.
How much will the Age Pension increase?
The twice-yearly indexation of the Age Pension – in March and September – is anchored to the CPI and the PBLCI, whichever is higher.
The Combined Pensioners and Superannuants Association (CPSA) reports that the Age Pension will increase by 4 per cent because between 1 January and 30 June, prices rose by 4 per cent.
The CPSA explains that the PBLCI showed an increase of 3.5 per cent, but because the CPI increase was 4 per cent, the latter would be used for the September increase.
Read: How to prepare for rising inflation and interest rates
“Centrelink will first calculate the partnered rate by adding 4 per cent,” the CPSA says. “The single rate will be calculated by taking 66.6 per cent of the partnered rate.
“This indexation information is not entirely accurate, because the pension consists of the basic pension plus the pension supplement plus the energy supplement.”
The CPSA says the energy supplement is not indexed at all and the pension supplement, which contains a number of historical supplements including compensation for GST, is indexed according to the CPI.
Pensioners doing it toughest
Treasurer Jim Chalmers says the government is committed to ensuring pensioners don’t fall further behind as inflation rises.
“We understand that pensioners are doing it incredibly tough when it comes to their costs of essentials like groceries, electricity and petrol and in other parts of the household budget,” he said last month.
“We don’t want to see pensioners fall further and further behind. And that’s why this indexation, which tries to keep up with the skyrocketing cost of living, is so important.”
In March, the single Age Pension rate, with supplements, increased by $20.10 to $987.60 a fortnight. For each member of a couple, fortnightly payments with supplements went to $744.40, an increase of $15.10.
Indexation of the Age Pension has become a hot issue, with prominent critics saying it should occur four times a year rather than two when inflation is surging.
Read: Review Age Pension rate every quarter, say experts
National Seniors chief advocate Ian Henschke says the adjustment cycle should be quarterly at times of high inflation, arguing that in real terms, the pension increase that was delivered in March had quickly been outstripped.
“The next Age Pension increase is not until September and by then inflation will have leapt ahead of the pension and [age pensioners] will be left even further behind,” he said. “It’s like the hare and the tortoise – no sooner do we try to get ahead of the cost of living and any increase has already been gobbled up by soaring inflation.”
What will a 4 per cent Age Pension increase do for you? What’s your view on more regular pension reviews? Have your say in the comments section below.
Updated 9 August 2022 8.02am. Article previously titled ‘Size of September Age Pension increase revealed’.
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