Pension increase on the way

Around 3.3 million age pensioners, disability support pensioners, carers, wife and widow pensioners and veteran income support recipients will receive an increase in their pension payments from 20 September 2009.

This increase includes the rise announced in the May Budget, as part of the Australian Government’s Secure and Sustainable Pension Reform, plus regular indexation.

The Government’s pension reforms will improve the adequacy of the pension, make its operation simpler, and secure its sustainability into the future.

These are the most significant reforms to the pension since it was introduced 100 years ago, and are a vital investment in preparing Australia for the future.

Single pensioner on the maximum rate of the pension will receive:
(see table below for more detail)

• An increase of $60 per fortnight ($30 a week) in the base pension;
• An increase of $5.00 per fortnight ($2.50 a week) in the new Pension Supplement; and
• Indexation increases of $5.50 per fortnight in the base pension and $0.33 per fortnight in the Pension Supplement.

This is a total increase for single pensioners on the maximum rate of $70.83 per fortnight, bringing total pension payments to $671.90 a fortnight.]

Couple pensioners combined on the maximum rate of the pension will receive:
(see table below for more detail)

• An increase of $20.30 per fortnight ($10.15 a week) in the new Pension Supplement; and
• Indexation increases of $9.20 per fortnight in the base pension and $0.43 per fortnight in the Pension Supplement.

This is a total increase for couple pensioners combined on the maximum rate of $29.93 per fortnight, bringing total pension payments to $1,013 per fortnight.

Pension Supplement

The increased Pension Supplement will be paid fortnightly from 20 September. The Pension Supplement replaces, and incorporates the full value of the Utilities Allowance, Telephone Allowance (at the higher internet rate), the GST Supplement and the Pharmaceutical Allowance.

The maximum Pension Supplement is $56.10 per fortnight for singles and $84.60 per fortnight for couples combined.

Pensioners will also receive their final quarterly payment of Utilities Allowance and Telephone Allowance with their regular pension payment after 20 September.

From 1 July 2010, pensioners will be able to choose to take around half of the new Pension Supplement in quarterly instalments.

Indexation

As part of the pension reforms, a new Pensioner and Beneficiary Living Cost Index (PBLCI) was developed by the Australian Bureau of Statistics.

The PBLCI takes into account the basket of goods pensioners buy and will help maintain pensioners’ purchasing power.

Pension base rates are now indexed to the higher of the increases in the PBLCI or the Consumer Price Index (CPI) over the previous six months. In the six months to June 2009 the PBLCI rose by 1.0 per cent. The CPI rose by 0.6 per cent over the same period.

Pensions are also benchmarked against wages as measured by Male Total Average Weekly Earnings (MTAWE), to keep pension rates in line with community living standards. Currently the benchmark for singles is 25 per cent, and following the $30 a week increase in the base pension, the benchmark will rise to 27.7 per cent at the next indexation point in March 2010.

The new PBLCI has resulted in a higher pension indexation increase in September than either the CPI or MTAWE. This will deliver a higher rate of indexation of $0.90 per fortnight for singles and $1.40 per fortnight for couples combined than would otherwise have occurred under the previous arrangements.

Other income support payments

Due to regular indexation, an estimated 1.1 million people in receipt of entitlements such as the Newstart Allowance, Partner Allowance, Sickness Allowance, Widows Allowance, Parenting Payment (Partnered and Single) will also receive an increased payment.

Allowance rates for single people aged 21 and over (for example Newstart recipients) will rise from $453.30 to $456.00 per fortnight due to indexation.

Pensioners will receive a letter from Centrelink soon detailing exactly how the pension changes will affect them.

Veterans’ Affairs pensioners will also receive pension increases of the same amounts, subject to the passage of legislation currently before the Parliament.

Full details of the changes to rates and thresholds