The Age Pension will stay the same this September, the decision is the first time in 89 years the rate has remained the same.
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The next pension indexation was slated for September 20, but the Age Pension, the Disability Support Pension, Veteran's Pension and Carer Payment won't increase.
The basis for indexation is the Pensioner Beneficiary Cost of Living Index, which is a special inflation rate for pensioners.
Pensions are indexed on the basis of inflation and wages and can't go down, but they can stay the same.
Combined Pensioners and Superannuants Association policy manager Paul Versteege said the PBLCI for the June 2020 and December 2019 quarters were the same.
"The pension indexation system works very well for pensioners, who even at the worst times, have a guarantee their incomes won't go backwards," he said.
"The only comfort for people with the pension as their sole source of income is that it can't go down. It would have but for that rule."
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A central Victorian pensioner said it was challenging to live on the Age Pension already, let alone with an increase.
Maldon resident Clif Edwards said the government was sending the wrong message by not increasing the payment.
"It's only five or 10 dollars a fortnight, but it hurts," the 71-year-old said.
"Our costs are only going up and I can't believe how much groceries cost.
"We don't buy meat because it's too expensive, and I'm a butcher's son."
Bendigo MP Lisa Chesters said the government was leaving pensioners behind.
"The costs of basics are going up and groceries have never been as expensive as they are today," Ms Chesters said.
"The government is being generous when it comes to workers, but they cannot leave our pensioners behind."
Senator for Victoria Sarah Henderson said indexation was not a decision of government, but was calculated based on a formula in social security law legislated by the Labor Party in 2009.
"The system acts as a triple lock ensuring pensions keep pace with the higher Consumer Price Index and PCLCI and is then benchmarked to average wages," Senator Henderson said.
Pensioners will continue to receive a maximum of $944.30 for single per fortnight and $1423.60 for couples.
Ms Chesters said Labor would have acted sooner.
"They should have found another way to get our pensioners a fair increase," Ms Chesters said.
"There are other measures the government could have looked to and worked out what is a fair increase."
Senator Henderson said the indexation formula ensured pension payment rates don't go backwards.
"The government has acted decisively to support pensioners having already provided two $750 payments to boost their income during the downturn, at a rate significantly higher than usual indexation," Senator Henderson said.