Pensions and other income security payments are due for an increase on March 20, but when will you actually see the extra money in your bank account?PENSION indexation day is almost here! Around 5 million people will get a boost to their social security payments from 20 March 2024.
Recipients of Age Pension, Disability Support Pension and Carer Payment will get an increase of $19.60 each fortnight (single rate), or $29.40 (couples combined).
This means that the maximum pension rate will be $1,116.30 (singles) or $1,682.80 (couples combined).
CPSA’s previous estimates were pretty spot on, though we’d estimated the single rate to be 10 cents less.
When to expect the increase
You might think that you’ll see the increase straight away, but unfortunately that isn’t the case.
Pensions are paid fortnightly, but they’re calculated based on a daily rate. The pension period ends the Monday before your pension lands in your bank account.
So, the payment that is due Thursday 21 March will be for the previous period. The following Centrelink payment date, Thursday 4 April, will be when pensioners and other payment recipients will see the increase.
Unfortunately, that won’t be the whole amount as the next payment period starts the day before indexation kicks in. For those receiving the single pension rate, you’ll get about $1.40 less than the full amount. Couples should receive $2.10 less than expected.
The upshot is, no one will receive the full increase until 18 April.
Doesn’t seem like much?
The March 2024 indexation is only an increase of 1.8%, less than many pensioners expected. This is because this pension indexation is based on the Consumer Price Index (CPI).
This isn’t always the case – there are other figures that come into play such as the Pensioner and Beneficiary Living Cost Index (PBCLI), which is used for indexation when it is higher than CPI. This time, it isn’t.
CPI is the official measure of inflation in Australia. It is calculated every 3 months to measure how much prices have gone up for a selected list, or ‘basket’, of goods and services. CPI isn’t a perfect measure of inflation – it only measures changes in a selected list of expenses, and this list and the weight of each item is based on average household expenditure.
The data used to determine average household spending is from the ‘Household Expenditure Survey’ (HES) which is conducted every 5-6 years. The last HES was conducted from 2015-2016 and 7,987 households were surveyed.
As you can imagine, it’s very likely that average household expenditure has changed in this time.
Of course, the average Australian household doesn’t really exist. It’s silly to think that a single parent living in Tasmania has the same expenses as a wealthy couple with no children living in Sydney.
The Australian Bureau of Statistics does their best to make up for this, but there is so much difference between households that it is not possible to accurately measure how inflation affects everyone using CPI.
This doesn’t make CPI a bad measure of inflation, but it does make it a bad tool for adjusting social security payments that are either below the poverty line or hovering just above it.
Prices increase by however much, which is then measured through CPI. Up to 6 months later, Centrelink payments are indexed.
Meanwhile, the prices have already been up for some time. This means that people living on a pension or other payment have been struggling for months to keep up.
If the pension and other payments were benchmarked to 125% of the poverty line, and then indexed based on CPI every 3 months, that would make a world of difference.
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PENSION indexation day is almost here! Around 5 million people will get a boost to their social security payments from 20 March 2024.
Recipients of Age Pension, Disability Support Pension and Carer Payment will get an increase of $19.60 each fortnight (single rate), or $29.40 (couples combined).
This means that the maximum pension rate will be $1,116.30 (singles) or $1,682.80 (couples combined).
CPSA’s previous estimates were pretty spot on, though we’d estimated the single rate to be 10 cents less.
When to expect the increase
You might think that you’ll see the increase straight away, but unfortunately that isn’t the case.
Pensions are paid fortnightly, but they’re calculated based on a daily rate. The pension period ends the Monday before your pension lands in your bank account.
So, the payment that is due Thursday 21 March will be for the previous period. The following Centrelink payment date, Thursday 4 April, will be when pensioners and other payment recipients will see the increase.
Unfortunately, that won’t be the whole amount as the next payment period starts the day before indexation kicks in. For those receiving the single pension rate, you’ll get about $1.40 less than the full amount. Couples should receive $2.10 less than expected.
The upshot is, no one will receive the full increase until 18 April.
Doesn’t seem like much?
The March 2024 indexation is only an increase of 1.8%, less than many pensioners expected. This is because this pension indexation is based on the Consumer Price Index (CPI).
This isn’t always the case – there are other figures that come into play such as the Pensioner and Beneficiary Living Cost Index (PBCLI), which is used for indexation when it is higher than CPI. This time, it isn’t.
CPI is the official measure of inflation in Australia. It is calculated every 3 months to measure how much prices have gone up for a selected list, or ‘basket’, of goods and services. CPI isn’t a perfect measure of inflation – it only measures changes in a selected list of expenses, and this list and the weight of each item is based on average household expenditure.
The data used to determine average household spending is from the ‘Household Expenditure Survey’ (HES) which is conducted every 5-6 years. The last HES was conducted from 2015-2016 and 7,987 households were surveyed.
As you can imagine, it’s very likely that average household expenditure has changed in this time.
Of course, the average Australian household doesn’t really exist. It’s silly to think that a single parent living in Tasmania has the same expenses as a wealthy couple with no children living in Sydney.
The Australian Bureau of Statistics does their best to make up for this, but there is so much difference between households that it is not possible to accurately measure how inflation affects everyone using CPI.
This doesn’t make CPI a bad measure of inflation, but it does make it a bad tool for adjusting social security payments that are either below the poverty line or hovering just above it.
Prices increase by however much, which is then measured through CPI. Up to 6 months later, Centrelink payments are indexed.
Meanwhile, the prices have already been up for some time. This means that people living on a pension or other payment have been struggling for months to keep up.
If the pension and other payments were benchmarked to 125% of the poverty line, and then indexed based on CPI every 3 months, that would make a world of difference.
Other Articles:
