Age Pension Increase: A Welcome Relief Amid Gradual Rise in Deeming Rates

The Federal Government increased the Age Pension from 20 March 2026, alongside a gradual rise in deeming rates. Advocacy group COTA Australia says the pension boost will offer relief, but warns updated deeming assumptions may not reflect the realities facing all older Australians.

From 20 March 2026, around 2.5 million Australians receiving the Age Pension saw an increase to their payments.

At the same time, the Federal Government confirmed that deeming rates will rise by 0.5 percentage points. From 20 March, deeming rates increased to 1.25% for financial assets below the threshold and 3.25% for financial assets above it.

For many older Australians, even a modest increase to the pension will be welcome.

COTA Australia has described the pension rise as important relief at a time when cost-of-living pressures remain high.

COTA Australia Chief Executive Officer Patricia Sparrow said many older people are carefully managing tight budgets.

“Any increase in the Age Pension is welcome. Many older Australians are carefully managing every dollar, and additional income will help ease pressure on household budgets,” Ms Sparrow said.

COTA’s recent State of the Older Nation report found that for one in four older Australians, poverty is not an abstract concept, but a lived experience.

“While it won’t solve the cost of living pressures many people face, an increase in the pension will make a small difference when it comes to managing rising costs for essentials like food, energy, insurance and healthcare,” she said.

What are deeming rates?

Deeming rates are used by the Government to estimate how much income you earn from your financial assets, such as savings accounts and investments. That estimated income is then used to work out how much Age Pension you receive.

For several years, deeming rates were frozen to protect pensioners during a period of economic uncertainty and rising interest rates.

The Government has now decided to gradually increase them rather than return immediately to higher levels.

Ms Sparrow said this measured approach reduces the risk of sudden changes to pension payments.

“A measured ‘step up’ reduces the risk of sudden impacts on pension payments and provides greater certainty for older Australians managing tight budgets,” she said.

Digital confidence matters

However, COTA has raised concerns about how deeming assumptions work in real life.

The Australian Government Actuary’s modelling assumes that people can access higher-interest products, such as online savings accounts. But COTA’s research shows that around one in seven pensioners is not confident using online services, including online banking.

“We know some older Australians are not digitally confident and may not access higher-interest online products,” Ms Sparrow said.

“It is important that deeming rates reflect realistic returns for all older Australians – including those who are not comfortable banking online.”

COTA says it regularly hears from older people who keep their money in everyday bank accounts because they are not comfortable managing online savings products.

What should you do?

If you receive the Age Pension, it may be worth reviewing your banking arrangements to ensure you are on a product that suits your needs. Some banks offer higher interest rates on savings accounts, although these are often managed online.

If you are unsure, speaking with your bank or a trusted financial adviser may help you understand your options.

COTA Australia says it will continue to monitor the impact of the updated deeming rates and advocate to ensure the system remains fair and workable.

For now, the March pension increase will provide some additional support. It may not resolve broader cost-of-living pressures, but for many older Australians and their families, every extra dollar still matters.

Source: This article was originally published on https://www.agedcareguide.com.au/talking-aged-care/age-pension-increase-offers-relief-as-deeming-rates-rise-gradually

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