Starting March 20, 2025, millions of Australian retirees will receive a modest adjustment to their Age Pension payments, thanks to the government’s biannual review. The increase will see a small rise in payments for single and couple pensioners, helping them keep up with the cost of living. However, many advocacy groups and pensioners argue that the increase is insufficient to address the growing financial pressures faced by older Australians, especially with rising costs in housing, healthcare, and everyday expenses.
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How Much Will the Age Pension Increase Be?
Based on estimates from National Seniors Australia (NSA), retirees can expect the maximum fortnightly Age Pension payment to increase as follows:
- Singles: $3.70 increase, bringing the total payment to $1,148.10 per fortnight.
- Couples (combined): $7 increase, bringing the total payment to $1,732.20 per fortnight.
In comparison, the September 2024 increase was higher—$28.10 for singles and $42.40 for couples. However, the March 2025 adjustment is notably smaller, reflecting the slowing inflation rate. While any increase is appreciated, for many retirees, the question remains: is it enough to cover everyday costs?
Understanding How the Age Pension Increase Is Calculated
The Australian government reviews the Age Pension twice a year—in March and September—to help pensioners stay in line with economic changes. The adjustment is based on the higher of two inflation measures:
- Consumer Price Index (CPI): Tracks the cost of goods and services across Australia.
- Pensioner and Beneficiary Living Cost Index (PBLCI): Measures cost changes specifically for pensioners.
If either of these measures shows a significant gap compared to the average wages in Australia, a further adjustment is made to help pensioners keep up with inflation. However, many advocacy groups, including NSA, argue that this system does not fully reflect the true cost of living for older Australians, especially as housing, healthcare, and energy bills continue to rise.
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Why Does the Pension Increase Feel Insufficient?
Despite the biannual increases, many pensioners believe the Age Pension is not enough to cover their basic living expenses. According to NSA’s research, retirees feel they need:
- $10,000 more per year for singles
- $15,000 more per year for couples
This discrepancy highlights the gap between the rising costs of living and the modest pension adjustments. In light of this, NSA is calling for a one-off boost of $10 per day for singles and $15 per day for couples, which would translate into an additional $3,650 per year for singles and $5,475 per year for couples. This proposal is far greater than the current increase, which amounts to only a few extra dollars per fortnight.
Bigger Financial Challenges for Pensioners: What Needs to Change?
Beyond pension increases, NSA and other advocacy groups are advocating for broader policy changes to improve the financial security of retirees. Some of the major recommendations include:
1. Freezing Deeming Rates
Deeming rates are used to determine how much income pensioners are assumed to earn from their savings, even if they’re not actually earning that amount. With interest rates still high, NSA suggests freezing the deeming rates to prevent pensioners from losing their benefits based on unrealistic income assumptions.
2. Encouraging Part-Time Work for Retirees
Many pensioners wish to work part-time to supplement their income but face penalties if they earn too much. NSA is pushing for an exemption on employment income from the pension income test, allowing retirees to work without the fear of losing their benefits. This would give older Australians the flexibility to remain active in the workforce without financial disadvantage.
3. Addressing the Housing Crisis
NSA suggests several housing-related changes to help pensioners:
- Exempting proceeds from home sales from the Age Pension means test for those over 80 who are receiving home care. This would allow them to sell their homes without losing pension benefits.
- Removing disincentives for renting out rooms, such as reducing pension payments or affecting capital gains tax, would help pensioners generate additional income without financial penalty.
4. Raising Gifting Limits
Currently, pensioners face strict limits on how much they can gift to family or charity without affecting their benefits. NSA recommends increasing the gifting limit to $17,500 for singles and $26,500 for couples, with future increases indexed to inflation.
Conclusion: A Small Increase Amid Bigger Financial Struggles
While the March 2025 Age Pension increase provides some relief for pensioners, it is clear that more needs to be done to ensure retirees can keep up with the ever-increasing cost of living. The increase of just a few dollars per fortnight is not enough to address the broader challenges pensioners face, including rising housing costs and healthcare bills.
The advocacy from National Seniors Australia and other groups for a larger pension increase, along with policy reforms such as freezing deeming rates and encouraging part-time work, highlights the need for systemic changes to ensure the financial well-being of Australia’s aging population. As the cost of living continues to rise, it’s crucial that the government addresses these challenges head-on to provide retirees with the security they deserve in their later years.
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