Age pension increase coming, but don’t expect big bucks

The March increase in age pension and other Centrelink payments won’t be what Aussies expect. Here’s what you’re set to get.

A looming rise in age pension payments is set to be the smallest increase in more than eight years.

Cooling inflation has meant the twice-yearly indexation of pensions and several other government payments is expected to climb just 0.4 per cent on March 20.

A report by seniors advice firm Retirement Essentials says that equates to just $4.52 extra per fortnight for singles and $6.82 combined per fortnight for couples combined.

It says if seniors use a cup of coffee as a standard-of-living yardstick, “singles won’t be able to buy a whole cup in most capital cities and couples will have to share that one cup”.

The federal government is expected to release official pension indexation details in the coming days. Indexation is based on the higher of the Consumer Price Index and the Pensioners and Beneficiaries Living Cost Index, and they rose by 0.4 and 0.2 per cent respectively in the six months to December 31, the Retirement Essentials report says.

The March 20 age pension increase is expected to be underwhelming. Picture: iStock

It forecasts a full single pension to rise from $1144.40 per fortnight to $1148.92, and the couples’ rate to climb from $1725.20 to $1732.02.

Previous pension rises last September were $26.54 per fortnight for singles and $41.17 for couples, amid higher inflation.

Retirement Essentials head of customer service Steven Sadler said clients remained concerned about the high cost of living, particularly grocery prices, and were unhappy about the pension rise.

“However, in an election year anything is possible,” the report says.

Mr Sadler said the age pension was not designed to be peoples’ only source of income in retirement.

“It’s designed to be a supplement and you use other money as well,” he said.

The last time the pension indexation increased by such a small amount in dollar terms was September 2016, according to Department of Social Services data. There was no increase in September 2020 during the pandemic.

“More is more, and you never run out of things to spend money on, but it is tiny,” Mr Sadler said.

COTA Australia chief executive officer Patricia Sparrow said more needed to be done to help older Australians, particularly pensioners.

“The hip pocket pressures facing older Australians, and all Australians, aren’t going away anytime soon,” she said. “We need to be looking at how we can support our most vulnerable older Australians better.”

MBA Financial Strategists director Darren James said it was “not all doom and gloom” for retirees, with some of the disappointment around pension rises being offset by continuing strong returns from term deposits.

“The pension can’t keep going up at the rate it did last year – previous increases were reasonably significant,” he said.

Seniors should ensure their assets are not overvalued. Picture: istock

Mr James said future pension rises were likely to be small if inflation stayed low and the Reserve Bank cut interest rates. This would also lower returns from bank deposits, he said.

“But other investments would benefit from that – a lot of people have bond investments.” And companies could start paying higher dividends if their borrowing costs fell, Mr James said.

Mr Sadler said part pensioners should try to maximise their payments by ensuring they did not overvalue their assets, which should be based on current market value rather than purchase price or insured value.

“It could give you a jump of $100 per fortnight in age pension just by tidying this up,” he said.

Originally published as Age pension increase coming, but don’t expect big bucks