The Age Pension 2025 update brings the most significant changes in years, with new rates set to take effect on 20 September 2025.
Pensioners across Australia will see a boost in their fortnightly payments due to indexation, while a long-awaited change in deeming rates may reduce entitlements for some.
The impact will vary widely depending on personal assets, income levels, and homeownership status.
These reforms affect millions of Australians and are being introduced to better reflect today’s economic environment. Let’s break down what’s changing and what it means for retirees.
What Are the Key Changes?
Biggest Indexation Increase in Two Years
From 20 September 2025, Age Pension payments will rise:
- Singles will receive an extra $29.70 per fortnight, taking the maximum single rate from $1,149.00 to $1,178.70.
- Couples will see an additional $22.40 each per fortnight, raising the combined rate from $1,732.20 to $1,777.00.
This increase is driven by indexation, which ensures pensions keep pace with inflation and wage growth. For many retirees, it’s a welcome relief from rising living costs.
Deeming Rates Finally Lifted
After a multi-year freeze, deeming rates will increase by 0.5%:
- The lower deeming rate rises from 0.25% to 0.75%.
- The upper deeming rate rises from 2.25% to 2.75%.
Deeming rates are used under the income test to calculate how much income pensioners are assumed to earn from their financial assets. The higher rates mean some retirees may have their Age Pension reduced, particularly part-rate pensioners with significant investments.
Who Is Affected?
- Around 180,000 full-rate pensioners are expected to shift to part-rate status due to the deeming rate lift.
- About 470,000 part-rate pensioners may see mixed outcomes—some gaining from indexation, others losing from the deeming change.
- The impact depends on personal financial circumstances such as assets, homeownership, and employment income.
Age Pension 2025: At a Glance
| Change | Details (from 20 Sept 2025) |
|---|---|
| Single Pension Increase | +$29.70 per fortnight (to $1,178.70) |
| Couple Pension Increase | +$22.40 each per fortnight (to $888.50 each) |
| Lower Deeming Rate | Rises from 0.25% → 0.75% |
| Upper Deeming Rate | Rises from 2.25% → 2.75% |
| Full-Rate Pensioners Affected | ~180,000 may move to part-rate |
| Part-Rate Pensioners Impacted | ~470,000 see varying results (increase or decrease) |
| Overall Effect | Largest indexation boost in 2 years + higher deeming |
Why Now?
The government froze deeming rates for several years to shield pensioners from falling incomes during high inflation and rising interest rates. With economic conditions stabilising, the reset of deeming rates is being introduced in tandem with indexation to soften the blow.
This approach avoids a sharp immediate reduction in pension payments and instead balances increases in living costs with gradual adjustments.
Winners and Losers
- Winners:
- Retirees with fewer assets or lower investment income will gain the full benefit of the indexation increase.
- Full-rate pensioners with limited savings are expected to see an overall improvement.
- Losers:
- Pensioners with higher savings, investments, or superannuation balances may face reduced payments under the income test due to the higher deeming rates.
- Many part-rate pensioners will experience only modest increases—or in some cases, small decreases—depending on their circumstances.
What Retirees Should Do
- Review Your Assets: Check how the new deeming rates may affect your eligibility.
- Update Centrelink Records: Ensure your financial information is current to avoid overpayments or underpayments.
- Seek Advice: Consulting a financial advisor or retirement planner could help maximise your benefits.
The Age Pension 2025 changes mark a turning point for retirees. While the indexation boost provides much-needed relief from inflation, the rise in deeming rates could offset gains for many.
With around 650,000 retirees directly affected, it’s crucial to understand how these updates apply to individual situations.
Planning ahead and staying informed will ensure pensioners make the most of their entitlements under the new rules.
FAQs
When will the new Age Pension rates start?
The new rates come into effect on 20 September 2025 as part of the scheduled indexation.
Why are deeming rates increasing now?
They were frozen during high inflation but are now being reset to reflect current economic conditions and investment returns.
Will all retirees see higher payments?
Not necessarily. While all pensioners get the indexation increase, some may lose out due to higher deeming rates reducing income-tested payments.