Pension indexation next time round: what will happen?
FIRST-UP, the inflation numbers for the September 2020 quarter (July, August, September) are irrelevant to pension indexation.
The pension is indexed every six months, and indexation uses March and December quarters.
But if the September quarter was used to index the pension, what would happen?
The Consumer Price Index (CPI) went up from 114.7 in the June quarter to 116.8 in the September quarter.
Based on that, you would think that the pension would go up but would it?
This is because the December 2019 CPI number was 117.1. For the pension to go up, the new CPI would need to be higher than 117.1. Until the CPI goes above 117.1, there will be no pension increase.
However, the CPI is not the only way of indexing the pension. There is also a Pensioner and Beneficiaries Cost of Living Index (PBLCI). If it produces a higher pension, it would be used.
So, what happened to the PBLCI?
The PBLCI went up from 115.6 in the June quarter to 116.5 in the September quarter. In the December 2019 quarter the PBLCI was 116.3.
116.5 is greater than 116.3. Therefore, the pension would go up.
But, again, the September 2020 quarter will not be used. We will have to wait to see what happens in the December quarter.
In the December 2020 quarter, either the CPI will have to be greater than 117.1 or the PBLCI will have to be greater than 116.3 for the pension to be increased.
But what happened in the September 2020 quarter will not count.