19 August 2012

Calculating new pension rates - step 3 of 3

Pension rates are reset every six months using a 3 step process.  Last week's publication of the Average Weekly Wage figures by the ABS (here) provides the final ingredient for the calculation of the pension rates to apply from 20 September 2012. 
To recap the process so far, the first step was to adjust the rate using the change in the consumer price index (CPI), giving us the CPI rate.  The second was to adjust the rate using the pensioner and beneficiary living cost index (PBLCI), giving us the PBLCI rate.  Each of these steps was discussed in more detail in earlier posts (step one is here and step two is here).

Now we can calculate the rate based on Male Total Average Weekly Earnings (MTAWE).  Whichever of these 3 rates - CPI, PBLCI or MTAWE - is highest becomes the new rate.  The new MTAWE figure is $1285.10 a week, or $2570.20 a fortnight.  The combined couple rate of pension is 41.76% of this, and the single rate of pension is a shade under 2/3 of the combined couple rate.  The rate for single parenting payment (PPS) recipients is 25% of MTAWE.  After the requisite rounding required by the Social Security Act 1991 the resulting MTAWE based rates are as per the table below.

Fortnightly rates

Current rate
CPI rate
PBLCI rate
MTAWE rate
Final rate
partnered pension (each)
$ 524.10
$ 527.20
single pension
$ 695.30
$ 699.40
$ 627.50
$ 631.30
single NSA (lower)
$ 489.70
$ 492.60
$ 492.60
$ 2.90
single NSA (higher)
$ 529.80
$ 533.00
$ 533.00
$ 3.20
partnered NSA
$ 442.00
$ 444.70
$ 444.70
 $ 2.70

An "n/a" in the table means the step does not apply to that particular payment - eg, the NSA rates are only adjusted by CPI, so the PBLCI and MTAWE steps are not applicable.

As I mentioned in the earlier posts, the rates in the table above are for the maximum basic rate component of the payment, not necessarily the total package.  For many single NSA recipients on the lower rate, the amount in the table is the total package, but for pensioners the package almost always includes a pension supplement as well.  For example, in the case of single pensioners (but not PPS) the pension supplement will change from $60.20 to $60.60, a 40 cent increase.  Combined with the $16.70 increase in the maximum basic rate, this will increase the single pension package by $17.10 a fortnight.

The results for this rate setting process give quite a stark illustration of one of the issues raised in the context of the current Senate enquiry into NSA and related payment rates - the difference in indexation methods between these payments and pensions.  As a result, on the 20 September the increase in single pensions will be almost 6 times greater than that for single NSA recipients.

As I mentioned in my earlier posts on this subject, these calculations of the new rates are mine alone.  Consequently there's plenty of scope for error.  The actual "official" rates are usually announced a little before 20 September.  So don't get too excited about my estimates of the increase you, or someone you know, will be getting.


The September rates have now been officially released via a press release from Minister Jenny Macklin.  You can find them here.

1 comment:

  1. This article is very helpful and informative. Thank you for sharing!