New indexation arrangements which were implemented from 20 September 2009 will better reflect increases to the cost of living pensioners face.
These changes are part of the Government's Secure and Sustainable Pension Reform package.
Around 2.8 million pensioners will benefit from the introduction of the new Pensioner and Beneficiary Living Cost Index (PBLCI) developed by the Australian Bureau of Statistics. The PBLCI is specifically designed to better reflect changes in the cost of living experienced by pensioner and beneficiary households, rather than the wider community.
The base pension rate will continue to be adjusted twice each year, in March and September*. It will be adjusted by the greater of the movement in the Consumer Price Index (CPI) and the movement in the new Pensioner and Beneficiary Living Cost Index.
This measure delivers the Government's election commitment to improve pension indexation to keep pace with pensioners' living costs.
Base pension rates will also continue to be checked against improvements in wages as measured by Male Total Average Weekly Earnings (MTAWE).
From 20 March 2010, the effective benchmark for single pensioners will increase from 25 per cent to 27.7 per cent of Male Total Average Weekly Earnings. The benchmark for a couple will be 41.76 per cent of Male Total Average Weekly Earnings.
The indexation changes are consistent with the findings of the Harmer Review and are guaranteed by legislation. They will help to deliver a stronger and fairer pension system that is secure and sustainable into the future.
*Disability Support Pension rates for people under 21 without children will continue to be adjusted in January in line with the CPI.