Centrelink Says Your Pension Is Going Up. So Why Might You Receive Less Than Expected?
The recent headlines sound like good news for retirees.
From 20 September 2026, the maximum Age Pension will increase by $36.80 per fortnight for singles and $55.60 per fortnight for couples combined as part of the latest round of indexation.
With many Australians still feeling the pressure of rising grocery costs, electricity prices, insurance premiums and healthcare expenses, any increase is welcome.
However, there's an important detail sitting behind the headlines.
At the same time the Government is increasing pension payments, it is also increasing the deeming rates used by Centrelink to assess income from financial assets.
For some Age Pension recipients, that may mean the actual increase received is less than expected.
Could This Affect You?
You may want to pay closer attention to these changes if you:
Receive a full or part Age Pension
Have money in bank accounts or term deposits
Own shares or managed funds
Have an account-based pension
Keep significant cash reserves
Aren't sure whether Centrelink assesses you under the Income Test or Assets Test
If several of those apply to you, the September changes could have a direct impact on your pension entitlement.
The Hidden Change Many Pensioners Miss
Alongside the Age Pension increase, Centrelink's deeming rates will increase from 20 September 2026.
The lower deeming rate will increase from 1.25% to 1.75%, while the upper deeming rate will increase from 3.25% to 3.75%.
For many retirees, the pension increase will be the headline.
The deeming change is often overlooked.
Yet for some people, it may have a greater impact on their Age Pension entitlement than the increase itself.
Understanding Centrelink can be challenging because different rules often move in different directions at the same time. In this case, pension rates are increasing, but so are the rates Centrelink uses to assess investment income.
What Is Deeming?
Many retirees assume Centrelink looks at the income their investments actually generate.
In many situations, it doesn't. Instead, Centrelink applies a deeming formula to financial assets such as:
Bank accounts
Term deposits
Shares
Managed funds
Account-based pensions
Using that formula, Centrelink estimates how much income those assets should be earning and uses that figure when applying the Income Test.
This means your assessed income can increase even if your actual investment income hasn't changed.
That's often where the confusion begins.
Why Some Pensioners May Receive Less Than Expected
Consider a retired couple with:
$500,000 in financial assets
A part Age Pension
A significant portion of their money held in cash and conservative investments
When the deeming rates increase, Centrelink may assess them as earning more income from those assets.
Their actual bank interest may be unchanged.
Their dividends may be unchanged.
Their spending power may be unchanged.
But Centrelink's assessment of their income may still increase.
If they are assessed under the Income Test, part of their September pension increase could potentially be offset.
This is why some pensioners may not see the full increase reflected in their bank account.
The Questions We Hear Most Often
One thing we regularly find is that many retirees don't actually know which Centrelink test determines their pension.
Many assume they're affected by the Assets Test when, in reality, the Income Test is driving their entitlement.
Following changes like these, common questions include:
Why didn't I receive the full increase?
Why is my pension different to my neighbour's?
Does the cash in my bank account affect my pension?
Has Centrelink got my balances recorded correctly?
Could I be receiving a higher entitlement?
They're sensible questions.
And they highlight how important it is to periodically review your position rather than assuming yesterday's strategy still delivers the best outcome today.
Three Things Worth Checking Before 20 September
1. Is Centrelink Working With Current Information?
Over recent years many retirees have used savings for:
Home improvementsTravel
Medical costs
Helping children and grandchildren
If Centrelink's information is out of date, your assessment may not accurately reflect your current circumstances.
2. Are You Holding Large Cash Balances?
Over the past few years we've seen many retirees build larger cash reserves for peace of mind.
While that can be appropriate, it's important to remember that cash is generally treated as a financial asset for Centrelink purposes.
A common misconception is that money sitting in a bank account has little impact on Centrelink assessments. In reality, it is still subject to deeming rules.
3. Do You Know Which Test Applies To You?
Centrelink applies both:
• The Assets Test
• The Income Test
Whichever produces the lower pension determines your entitlement.
Knowing which test currently applies can help you better understand how future changes may affect your benefits.
A Small Difference Can Add Up
Many people focus on the fortnightly impact.
That's understandable.
However, even a relatively modest difference in pension entitlement can add up over time.
An extra $20 per fortnight may not sound significant, but over a long retirement it can amount to many thousands of dollars in additional income.
That's why seemingly small Centrelink changes are often worth paying attention to.
The Bigger Opportunity
While the September changes are important, they also serve as a reminder that retirement planning is not a set-and-forget exercise.
Investment markets move.
Legislation changes.
Centrelink rules evolve.
What worked well five years ago may no longer be the most effective arrangement today.
Retirement isn't just about what you've accumulated. It's about making sure all of your income sources work together as efficiently as possible.
The Bottom Line
The September 2026 Age Pension increase is undoubtedly welcome news. However, the simultaneous increase in deeming rates means some pensioners may not receive as much of the increase as they expect. 1
If you receive a full or part Age Pension, now may be a good time to review:
• Whether Centrelink has current information
• Which test is determining your entitlement
• How large cash holdings may affect your assessment
• Whether your retirement income strategy remains appropriate
A quick review today may help avoid surprises after 20 September.
Important Information: This article contains general information only and does not take into account your personal objectives, financial situation or needs. Centrelink outcomes vary between individuals. Before acting on any information, consider whether it is appropriate to your circumstances and seek professional advice.