September pension indexation estimated at highest since 2022
The upcoming pension increase is likely to be the highest since the high inflation during the Covid pandemic, according to estimates by National Seniors Australia.
Based on the latest Australian Bureau of Statistics (ABS) data, National Seniors Australia is estimating the September pension indexation at $55.80 for a combined couple and $37.00 for singles. This would take the maximum combined couples fortnightly pension to $1,866.20 and $1,237.90 for singles.
Such an increase would be the highest pension indexation since September 2022, which followed high inflation during the Covid pandemic.
For more detail about how the pension could change based on different levels of assets, see our updated age pension indexation estimator.
Note that this is an estimate prepared by National Seniors Australia based on the currently available Australian Bureau of Statistics data, with the official government announcement likely to come in early September.
This follows from the indexation to a number of pension thresholds on July 1, which would have increased pension payments for some recipients.
Additionally, the announcement of updated deeming rates - which impact the income test - is due by 20 August. The rates are currently 1.25% up to the lower threshold, which varies for singles and couples, and 3.25% for the rest of financial assets. In March 2026 both rates were increased by 0.50%, the second such increase after the rates were frozen. One factor that will flow through to investments, and so has bearing on the deeming rates, is the RBA cash rate decision at the next meeting on 11 August.
Note also that the pension indexation and deeming rate update occurs at the same time as the automatic bi-annual revaluation of assets by Services Australia. This means the final pension change could be the result of multiple factors pulling in different directions.
Age pension benefits from higher of two inflation measures
The age pension is subject to a complicated indexation process which is intended to keep the age pension in line with the cost of goods and services. So, the pension indexation is highest following periods of high inflation, and lower as inflation declines. Though this doesn’t mean that prices are coming down, just that they are increasing at a slower rate.
The age pension indexation isn’t just based on the widely known Consumer Price Index (CPI). Instead, it takes the higher of CPI and the Pensioner and Beneficiary Living Cost Index (PBLCI), which is meant to account for the different spending patterns of people receiving the age pension.
The age pension indexation is based on the previous six months of inflation. So, for September, it is based on the inflation from January to June
For the latest ABS data, we estimate that the upcoming age pension indexation will use the PBLCI figure. On a six-month basis CPI has been steady at around 2%, while PBLCI has been increasing and reached 3.2% in the six months to June 2026.
It is not the raw percentage changes that determine the increase, rather separate categories of spending, such as ‘food and non-alcoholic beverages’ or ‘transport’, are weighted based on the approximate proportion of typical spending.
Since the PBLCI is higher, the largest changes in prices for the six months up to June 2026 using that index were in health (7.08%), housing (5.86%), then insurance and financial services (5.57%). But once the weightings are applied, housing was the largest contributor to the increase, followed by health.
If the indexation was based only on CPI rather that the higher of that or PBLCI, instead of a maximum increase of $55.80 for couples and $37.00 for singles, we estimate it would be $35.80 and $23.70. Just this indexation method for the age pension could mean $520 extra in age pension for a couple over a year.
But this higher indexation doesn’t apply to the whole pension. The age pension is made up of three payments:
- Basic Rate
- Pension Supplement
- Energy Supplement
The higher of CPI or PBLCI indexation only applies to the pension ‘basic rate’. The pension supplement is only indexed to CPI. The energy supplement is not indexed and instead fixed at $10.60 for each member of a couple and $14.10 for singles.
The higher indexation level is then checked against a measure of wages and increased if it falls below a particular level.
Age pension indexation can impact aged care and tax
Eligibility for the age pension is not just relevant for income in retirement but also determines eligibility for the Pensioner Concession Card – which is used by the States and Territories to determine eligibility for a range of cost-of-living relief in addition to support such as cheaper medication through the PBS. An easy way to find these concessions is through our concessions calculator.
Age pension eligibility also determines how much people pay in co-contribution for aged care under the Support at Home program. For people who were already in the system, and so covered by the ‘no worse off’ principle, having a full pension means a 0% co-contribution rate, compared to the 25% for non-clinical care for self-funded retirees ineligible for the Commonwealth Seniors Health Card. For people who weren’t approved on 12 September 2024, a full pensioner has 5% co-contributions for ‘independence’ care, such as transport and assistive technology, which can reach up to 50% for some people. For ‘everyday living’ – which includes meals and gardening – the full pensioner co-contribution rate is 17.5% but increases for part pensioners and self-funded retirees up to 80%.
Note that from 1 October, personal care such as showering will be moving into the clinical care category – which is 0% co-contribution for everybody. Additionally, changes to capital gains tax announced in the latest federal Budget to introduce a minimum 30% tax on capital gains also has an exemption for people receiving the age pension.
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