More than 750,000 pensioners will benefit from a drop in deeming rates, the federal government says.
Pension deeming rates will be reduced from March 20.
The decision will provide part-rate pensioners with an average pension increase of $6.80 per fortnight, Families Minister Jeny Macklin said in a statement on Tuesday.
Deeming rates reflect the standard rates of return that pensioners can earn from their financial assets.
They are used to determine how much pensioners receive under means-testing rules.
The lower deeming rate will decrease from three per cent to 2.5 per cent for financial investments up to $45,400 for single pensioners or $75,600 for a couple.
The upper deeming rate will decrease from 4.5 per cent to 4 per cent for balances over these amounts.