Age pension increase not likely until budget, says BT
With an increase in the age pension based on the standard indexation now ruled out, pension recipients now may have to wait until the budget to see any increase in their payments, says BT Technical Services.
BT head of financial literacy and advocacy Bryan Ashenden said last week it was announced that the vast majority of income support payments from the Department of Social Security will not increase from 20 September this year.
“This is not as a result of any government intervention, but rather because the standard indexation is tied to movements in the consumer price index,” Mr Ashenden explained in a BT Technical Services podcast.
Indexation for the age pension, he said, is normally tied to the greater of movements in the CPI, which fell by 1.9 per cent in the June quarter and 0.3 of a percentage point over the last 12 months, or movements in the Pensioner Living Costs Index, which also fell by 0.6 of a percentage point in the first half of 2020.
“While deflation doesn’t give rise to a drop in pension payments, under the statutory formula it does mean that there is no automatic increase,” he said.
In recognition of this, the government has already indicated it is considering possible intervention, Mr Ashenden said.
“Some approaches on the table [include] a legislated lift to the base rate of payment, or additional ‘one-off’ payments like we have seen twice this year as part of the COVID-19 economic response packages,” he said.
“However, pensioners may have to wait until this year’s federal budget on 6 October 2020 for confirmation of any additional payments.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
