Age Pension rates will be indexed in a few days on 20 September, but will the estimated increase match inflationary figures?
Taking into account government figures, it’s estimated the Age Pension should increase by 2.6 per cent.
This is slightly better than the March 2024 indexation of 1.8 per cent, which reflects a higher cost of living. This should mean an extra $28.10 a fortnight for singles and $42.40 for couples.
But do these figures accurately reflect the inflationary pressures in the community?
Calculations
The Age Pension is calculated twice a year on 20 March and 20 September.
The increase is calculated using whichever is higher of the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI). The PBLCI is an index for people who are on government payments and it uses a slightly different ‘basket’ of goods than the CPI.
For example, the PBLCI places less emphasis on the cost of education as it assumes older people aren’t spending as much on paying for schooling.
Since the last indexation in March, the CPI has risen by 2 per cent and the PBLCI by 2.6 per cent, so the Age Pension should increase by 2.6 per cent.
The monthly Consumer Price Index (CPI) indicator rose 3.5 per cent in the 12 months to July 2024, down from 3.8 per cent in June, according to the latest data from the Australian Bureau of Statistics (ABS).
The most significant contributors to the annual rise were housing (+4.0 per cent), food and non-alcoholic beverages (+3.8 per cent), alcohol and tobacco (+7.2 per cent), and transport (+3.4 per cent).
Indexation
While the Age Pension is indexed every six months and the above figures are yearly, it still doesn’t seem equitable that everything has risen more than the 2.6 per cent predicted pension increase.
Energy prices continue to bite. Electricity prices fell 5.1 per cent in the 12 months to July, down from a rise of 7.5 per cent in June.
However, according to the latest Australian Competition and Consumer Commission figures, the median effective energy prices for residential customers across all regions grew by 14 per cent between September 2022 and September 2023.
That’s a massive chunk out of anyone’s budget, regardless of what year it happened in, and with current prices based off that elevated level, it can in no way be compensated by a few percentage increases twice a year.
The CPI figures may also miss out on the fact that many people are simply just not choosing to spend on data items that are included in the CPI basket of goods, and thus can’t be measured.
Health costs
Perhaps the best example is dental work. Anyone who has been to the dentist lately will know even a regular appointment is $200-$300. Well, when you are on the Age Pension, those sorts of dollars are often a luxury you can’t afford.
According to the Australian Dental Association, many Australians are simply delaying or ignoring the need for treatment due to the cost.
The association’s annual oral health survey of 25,000 people has found that only around one-third (31 per cent) of people go to the dentist for a check-up every year.
The results showed 61 per cent of people had made a conscious decision to delay treatment in the past 12 months, which is a 17 per cent increase over the past 13 years.
You can’t include those figures in the CPI if people are simply not spending the money.
But even basic healthcare is hitting people hard.
According to the latest private health insurance statistics from the Australian Prudential Regulation Authority, the average out-of-pocket gap fee for elective hospital stays is now $426.80 compared with just over $400 a year ago.
Meanwhile, The Australia Institute’s Matt Grudnoff pointed out in YourLifeChoices’ most recent Retirement Affordability Index that the cost of pharmaceutical products had risen by 7.1 per cent.
Costs versus income
Once again, those sorts of figures are in no way covered by a $28.10 per fortnight increase in the pension.
And lastly, perhaps the weighting needs to change. Once upon a time it was assumed age pensioners mostly owned their own homes, and the PBLCI was set up to reflect that. And CPI only includes the initial cost of housing, not increases in mortgage payments due to inflation.
However, with an increasing number of older people renting or still paying off a mortgage, those assumptions no longer apply and housing and housing stress are playing an important part in household budgets.
What do you think, does indexation reflect the cost of living? Why not share your thoughts in the comments section below?
Also read: Why it’s worth checking you pension eligibility again
The pension rises are a joke.
You’re not wrong!
As our Super runs out, and trying to survive on the Pension fortnightly, I also try to gain some employment to subsidise our Pension. We live on the road, and have done for 12 years, owning our caravan and car. But I feel for those Pensioners who cannot do what we do, and are stuck in a whirlpool of debt – simply because of their health, their family situation or their mortgage and rent costs. We decided that we could not afford $500 a week rent 12 years ago, and used a lot of our Super to purchase a 24ft caravan and brand new towing vehicle. Thank God – both have been amazing, even though we have travelled over 250,000 klms and been every where except WA because of COVID.
Now, 12 years later, even though I am 74, and had a hip replacement this year, I am fit enough and healthy enough to apply for some work. However, employers ask the most stupid of questions, respond with the most “stupid of AI responses” and restrict themselves to young millenials who have no life experience or any idea about customer service. I don’t think many of them can even spell it.
This Labor government DID change the rules to allow us to earn a few more dollars, but $380 a fortnight – if you can get that every fortnight is OK – would be minimal income. At least you aren’t taxed on that minimal amount. BUT I want to work more than those few hours – for which I am then penalized for even thinking about it! Taxed at 50% for every dollar above the $380. I WANT to work. I WANT to have a reason to get up every morning, and every employer SHOULD be keen to employ someone with a “them first attitude!!” BUT NO!!
I find the pension, for the majority of Australians, very concerning. Most of these men & women have worked, and worked hard, to give us what we have today. We live in an amazing country, but we are spending more and more on getting others here instead of taking care of our own.
Don’t we owe safety, good health and security to all – those who are at retirement age now have been through a true depression, have seen a world war, were raised with food coupons as opposed to wages earnt (post war parents earnt food coupons not wages).
Stop increasing unemployment benefits and start providing for our pensioners, the disabled, the police and the military.
Stop throwing our money around to politicians, who earn high wages any way, and the unemployed and start providing for those genuine Australians who gave us our today with their yesterday(s).
One major expense that is making a mess of our budget is insurance, and I dont see it mentioned in the above. My home and contents insurance increased 32% last year and then another 30% this year. If it keeps on rising at this rate I will not be able to renew next year, In this case I think it unreasonable for the pension to match the increases, however the govenment needs to take to insurance industry to task with respect to excessive profiteering, and maybe force them to give pensioner concessions?
I consider insurances to be nothing more than legalised scams. They all take much more money than they ever pay out. When one pays $400 – $500 per month or (in some cases per fortnight) for insurance for a period of 2 or more years without any claims and then gets reimbursed $200 out of a $700 bill once in a 12-month period, one is getting scammed, in my opinion.
When one pays for insurance, there should be no out-of-pocket expenses, and the bill should be covered in full. After all, that’s what one should be paying “insurance” for — not to overfill some greedy corporate purse.
I totally agree with the comments i`ve read above.
i`m going to ad though how can anyone believe the proposed $28 is a “boost”?.
it cost`s that much just for two or three grocery items.___depending on what the items are.
it is NOT going to help with anything else.
But what do those misguided idiots in Canberra care?,
They are just too well looked after, and too interested in looking after the billionaires,
foriegn interest`s ( chinese government and other dictators) and others that THEY like to think matter to them.
The Age Pension Rate is abysmal, with the Single Rate at $1,144.40 Per Fortnight ($29,754 Per Year) compared with the “Male average weekly ordinary time earnings of $2014.30” or $4028.60 Per Fortnight ($52,371.80 Per Year).
Maybe the Pension Rate for ALL Pensioners should be a percentage of this value, say around 70-75%, then it would cover those that Rent and those that still have Mortgages.
From the Article:-
“Electricity prices fell 5.1 per cent in the 12 months to July, down from a rise of 7.5 per cent in June.”
I saw the Rise in Electricity Prices, but have NOT seen any Reduction at anytime !!!!
Was this a Fall in the Wholesale Price, and in which State or Territory did it happen ??
Because the Retail Price has NOT fallen !!
After the above have been applied, then the pension is compared to the Total Average Weekly Male Earnings (TAWME), and the rate is applied at 41.7% of the above, and the one that is highest is then the new rate for couples. The single rate is 66.33% of the couple rate.
These rates haven’t changed in over 32 years, but they should be increased to 50% for couples, and 70% of the couple rate for singles. THEN we may have a fairer rate of pension for all.
I’ve been saying this for many years, but when confronting any political candidate who wants my vote to change this abysmal situation – they say that they can’t do anything about it. Is it any wonder that anything to do with politics is no longer relevant to me?
In NSW, our electricity rates fell, but only by the slightest amount. I know, as I’m now on the new rate and also receive a larger discount of 18% compared to the ‘old’ one of 15%. I’m happy.
Rates concessions haven’t increased for over 30 years, yet rates keep going up and there are more and more additional costs piled onto the rates. Water used to be included in rates. Now it’s costing us an extra $600-900 a year. Insurance costs have skyrocketed. Electricity has NOT gone down. It just keeps rising and solar FIT rates have crashed to nothing. Food costs have gone up by far more than the CPI. Petrol and transport costs have gone up more than the CPI. These are the key things pensioners need to pay for, yet these price rises are not accurately factored into calculations. But I guess none of these cost increases worry the people making the decisions, do they?
Totally agree Lorraine. I have contacted my local state and federal member about the rates discount, that has not changed in years, not even by CPI. Neither are interested. Its like the so called petrol discount. 4c off a litre price of $1 is fine, but doesn’t help much when it’s $2.30 a litre.
Lorraine, in NSW when most of the country electricity rates rose, ours actually fell. Not by much, but enough to make a difference.
I’m now on the new lower rate and receive an 18% discount compared to the old higher rate and only 15% discount. I’m happy
An increase of $28 per fortnight is a total joke. Our weekly cost of living has risen by more than twice that amount in the past six months. Notice that it’s weekly, not fortnightly.
We older citizens who are able-bodied enough to do so should be permitted to earn as much as we like and still keep our full pensions. That way, we will be able to manage the actual costs of living, not some imaginary politically motivated projected percentage.
Our politicians are so politically, financially, and, in actuality, insulated from the reality of life outside their little parliamentary world that they have no real idea of what our life in suburbia is really like.
Therefore, how can they, us or anyone expect them to be able to form any concept of what impact the actual cost of living is having on the ability of pensioners existence? The $28 per fortnight is evidence of this literal gap in understanding.
My advice to the political parties making decisions on what pensioners should or should not have is to abolish the means test and income tax on pension payments for pensioners.
An increase of $28 per fortnight is a total joke. Our weekly cost of living has risen by more than twice that amount in the past six months. Notice that it’s weekly, not fortnightly.
We older citizens who are able-bodied enough to do so should be permitted to earn as much as we like and still keep our full pensions. That way, we will be able to manage the actual costs of living, not some imaginary politically motivated projected percentage.
Our politicians are so politically, financially, and, in actuality, insulated from the reality of life outside their little parliamentary world that they have no real idea of what our life in suburbia is really like.
Therefore, how can they, us, or anyone expect them to be able to form any concept of the impact the actual cost of living is having on pensioners’ ability to exist? The $28 per fortnight is evidence of this literal gap in understanding.
My advice to the political parties making decisions on what pensioners should or should not have is to abolish the means test and income tax on pension payments for pensioners.
I agree we should be able to work the hours we want & not lose any pension as a friend said when pollies leave they get a huge bonus & keep their pensions NOT FAIR
Totally agree with all of these comments. For some reason as a NSW resident, my experience was energy prices increased, then came the paltry rebate, but the rebated price is still significantly higher than 6 months ago.
As one of the many pensioners who took the government’s advice and downsized, we moved from an environment where insurance was voluntary and we could drop it, to a Strata environment where the State Government has legislated we must take insurance and have experienced a 32% increase this year.
The reason no level of government will look at this is the Strata Schemes across the state are the biggest contributor to the Emergency Services Levy, so without Strata, State would have to find more funding for emergency services. Easier to ‘tax’ Strata.
Like aged pensioners, Strata Schemes have no voice and no responsible Minister looking out for them.