Age pension payments are set to increase from September 20, in a bid to keep up with the rising cost of living in what will be the “largest indexation increase” for pensioners in 12 years.

The Age Pension will rise by $38.90 for singles and $58.80 for couples, per fortnight, making the maximum fortnightly pension rate $1026.50 for singles and $1574.60 for couples (or $773.80 for each person in a couple).

The Disability Support Pension and Carer Payment will see the same increase.

Minister for Social Services, Amanda Rishworth, said the Consumer Price Index (CPI) is the driving factor behind the rise, noting the CPI had surpassed the Pensioner and Beneficiary Living Cost Index.

“We want to ensure Australia has a strong social security safety net to protect our most disadvantaged,” Rishworth said.

“Our guiding principles as a Government are ensuring no one is left behind and no one is held back and this indexation increase will help those on Government payments keep up with the cost of living.”

Rishworth said income and asset limits will change in response to the raise, to “ensure people are not disadvantaged”.

In addition to the age pension increase, Prime Minister Anthony Albanese announced a temporary allowance for pensioners to earn extra income, as a “one-off income credit designed to give older Australians the option to work and keep more of their money”.

Currently, pensioners can only earn $7800 a year before their payments are affected.

Under the new changes, age pensioners will now be able to earn an additional $4000 over this financial year without losing any of their pension until Jun 30, 2023.

“These changes will give older Australians the option to take up work if they wish to do so,” Albanese said.

“This is an important measure to ensure older Australians have the option to remain in the workforce if they wish to without losing access to their pension and benefits.

“It will mean if they wish to work for short periods of time they can also, broadening their choices.”

The changes announced by the Albanese government are aimed at addressing both the rising cost of living and Australia’s labour shortages.

Treasurer Jim Chalmers said during his closing remarks at the jobs summit that “in order to get more older Australian workers into the workforce, we need to make that easier by relaxing the various work tests”.

For more information on the pension updates, visit the Department of Social Services website.