The Government will ensure that the full rate of pension increases with changes in community living standards.
A new legislated pension benchmark will deliver an increase for singles to 27.7 per cent of Male Total Average Weekly Earnings up from 25 per cent.
It is important that pension increases keep pace with the prices of goods that pensioners typically purchase.
The Government will develop a new price index, to apply from 20 September 2009, designed specifically for households who rely on the pension.
The Government will use this new measure of price changes, the Pensioner and Beneficiary Living Cost Index, to index base pension rates where it is higher than the CPI. The CPI will still be used to index relevant eligibility thresholds.
The Government will continue to ensure that base pension rates keep up with community living standards by increasing the current benchmark.
Currently, the single rate of pension is benchmarked to 25 per cent of Male Total Average Weekly Earnings (MTAWE). That is, the pension is set at this level if CPI indexation happens to produce a lower pension rate.
Under the new arrangements, not only will the pension be increased by the higher of the CPI or the new Pensioner and Beneficiary Living Cost Index, but the effective benchmark for the single pension will also be increased from 25 per cent to 27.7 per cent of MTAWE.
This increase in the benchmark of more than 10 per cent will be enshrined in legislation.