From 20 March 2026, the Federal Government introduced an increase to the Age Pension, providing welcome relief for millions of Australians. At the same time, deeming rates have begun to rise gradually — a change that may influence how your pension is assessed and, ultimately, how much you receive.
While the increase itself is positive, understanding how these changes work together is key to making informed financial decisions in retirement.
A Welcome Boost Amid Rising Costs
For many Australians, the pension increase comes at a time when cost-of-living pressures remain high. Everyday expenses such as groceries, energy, insurance and healthcare continue to rise, and for those living on a fixed income, even a modest increase can make a meaningful difference.
Although the adjustment may not completely offset these pressures, it can provide some additional breathing room and help ease the strain on household budgets. For many retirees, it’s a reminder that even small changes in income can have a real impact on day-to-day living.
Understanding Deeming Rates
Alongside the pension increase, deeming rates have also been adjusted. Deeming is the method Centrelink uses to estimate the income you earn from your financial assets, such as savings accounts and investments.
Rather than assessing your actual earnings, the Government applies a standard rate of return. This assumed income is then used to determine your Age Pension entitlement — regardless of what your investments are actually generating.
From March 2026, deeming rates increased to:
- 1.25% for financial assets below the threshold
- 3.25% for financial assets above the threshold
While these changes are being introduced gradually, they still represent a shift that could affect how your pension is calculated.
Why the Changes Matter
For several years, deeming rates had been frozen to support retirees through a period of economic uncertainty and rising interest rates. The Government’s decision to begin increasing them again reflects improving conditions, but the gradual “step-up” approach is designed to reduce the risk of sudden changes to pension payments.
Even so, an increase in deemed income may impact how much Age Pension you receive. This makes it important to understand how your financial position is being assessed — not just what you are actually earning.
The Reality for Many Retirees
While deeming assumes access to higher-return investments, this doesn’t always reflect real-life behaviour.
Many retirees prioritise simplicity, security and accessibility when managing their finances. Others may not feel comfortable using online banking platforms or moving funds into higher-interest products. As a result, the income Centrelink assumes you are earning may not align with your actual returns.
This disconnect highlights the importance of having a strategy that works for you — not just one that fits within a standard formula.
What Should You Be Doing Now?
Changes like these are a timely reminder to review your financial position and ensure your strategy continues to align with your lifestyle and goals.
It may be worth considering whether your current banking and investment structures are working efficiently, how the updated deeming rates may impact your entitlements, and whether there are opportunities to optimise your position moving forward.
Even small adjustments, when made at the right time, can have a meaningful long-term impact on your financial security.
How We Can Help
At Enhance Financial Partners, we work closely with clients throughout retirement to help them navigate exactly these types of changes.
Our approach is focused on clarity and confidence — ensuring you understand how the rules apply to you, while building a strategy that supports your lifestyle both now and into the future.
Whether it’s structuring your assets, maximising your entitlements, or simply making sense of complex changes, we’re here to guide you every step of the way.
If you would like to understand how the recent Age Pension increase and deeming rate changes may affect your personal situation, now is the perfect time to review your strategy.
Reach out to our team at Enhance Financial Partners to start a conversation and take control of your financial future with confidence.
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 . Reproduced with permission of Care & Co Media
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