Boost for pensioners expected in government aid package

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A cut to deeming rates is expected this week as part of a federal government economic package to stimulate an economy reeling from the effects of the coronavirus and a summer of bushfires.

It would be the second time in less than a year that deeming rates have been cut.

In a keynote address in Sydney today, Prime Minister Scott Morrison is expected to outline a stimulus package that will fast-track assistance to age pensioners and small businesses.

Of particular interest to older Australians, who constantly complain to YourLifeChoices about the disparity between current deeming rates and interest rates on offer, are the mooted changes.

A Meeting Place post from YourLifeChoices member Nev was typical of hundreds of complaints received after the Reserve Bank cut official rates last week to 0.5 per cent. Nev wrote: “Now that the RBA has dropped the cash rate again by 0.25 per cent, surely the government should be dropping the three per cent deeming rate. Our super has just had the entire year’s gains wiped out and retirees can’t sustain this type of loss along with the government gouging from the assets.”

Seniors groups say that more than 600,000 people are being short-changed because the government is overestimating how much they’re earning from their investments.

Deeming rates calculate the amount of income received from a financial asset regardless of the actual return and determine how quickly retirees lose access to the full or part Age Pension.

In July last year, Treasurer Josh Frydenberg cut the deeming rate on the first $51,800 of a single pensioner’s financial investments – and the first $86,200 of a couple’s – from 1.75 per cent to one per cent. The deeming rate for balances above those amounts fell from 3.25 per cent down to three per cent.

It was the first adjustment to deeming rates since March 2015, despite a series of official interest rate cuts by the Reserve Bank.

Social services minister Anne Ruston said: “I suppose it [deeming rates] is a tool that we give people to make their life easier when they’re on pension or payment and they’re receiving income from their financial assets.

“So while, as a secondary effect, I’m sure that any extra money in the pockets of any Australians is going to provide a stimulus, that’s not the underlying reason why we change deeming rates.”

A permanent increase to the Newstart rate would not form part of the stimulus package, Senator Ruston said, warning that was a “separate conversation” to the coronavirus economic response. However, temporary support to help casual workers affected by the coronavirus is expected.

“As the Prime Minister has clearly said, the stimulus package he is looking to deliver to the Australian people is around a short-term, measured and proportionate response,” Senator Ruston said.

“Any long-term structural changes to anything we’re doing will be subject to a separate conversation.”

Will a cut to deeming rates make a big difference to your retirement income? Should deeming rates be reviewed more regularly?

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Written by Janelle Ward

80 Comments

Total Comments: 80
  1. 0
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    All for the pensioners, nothing (again) for the self funded folk.

    • 0
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      And those stuck on Newstart!

    • 0
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      It means nothing to those on full age pension, there’s 1,952,700 of them Australia wide. They simply don’t have enough to be worried by deeming rates. It’s just for the part-pensioners whose income and assets exceed the current thresholds.Apparently there’s 600,000 part-pensioners who will benefit. That’s bugger all as far as national stimulus goes.

    • 0
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      My mum’s friend is a part pensioner and she is always spending money already.

    • 0
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      All true comments – thing is, Janus, if you are adequately self-funded, you fall outside the whole idea of pension….. there are arguments all ways on this, as you’ve seen her many times.

      Still no mention from Labor about clawing back the imposition on SFRs and part-pensioners with the LNP changes back yonder.. 2016 wasn’t it?

      Potential incoming governments never commit to such things – they know they’ll ‘need’ the money to fund their pet schemes… forget about the core bills falling due…. great way to run a business or household.

      Every person should be given shares in AustraliaInc, for each social science shenanigan that affects them etc, and for all their work efforts over the years as evidenced by tax returns – and should receive a dividend in retirement from their shares.

  2. 0
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    Agree with Janus. We just need to have a universal aged pension for all. Govt doesnt miss out cos then everyone will just be in the normal tax system. Plus reducing substantially the centrelink bureaucracy. Like in most other countries.
    Separately; newstart receipents should be given a boost cos they spend all they have and dont sock it away; thus assisting the economy

    • 1
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      Genuine Newstart recipients are hard done by as well.

      Someone who loses their job through no fault of their own
      goes into Centrelink to claim – first question – what savings
      have you got?

      Answer: None – Welcome to the gravy train.
      Answer: A fair bit. Fine – go away and live on that
      and come back here when it’s all gone.

      We live under a bizarre system.

      In most developed countries you pay social security out of your
      wages and draw on it if you hit hard times. You need to have a good
      payment record to qualify. There is also welfare for those who miss
      out altogether. Here we mainly only have the latter – the former is
      miserably mean the latter is extraordinarily generous – so a magnet
      for those who choose welfare as lifestyle choice – a dead loss for
      people in genuine need.

    • 0
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      adbob
      When you say go away until your savings are gone, you don’t receive any Help From Employment Agencies so out of Pocket Expense as Well as Living Costs.
      They work on Government Payments or you pay them.
      They are suppose to, but will bin your application.
      We do live under a bizarre system.
      Happen to me Many Years ago.

    • 0
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      Employment agencies don’t help anyone,most people find their own jobs, it is a money making racket.

    • 0
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      Yes, john – but then the SFR would be paying tax on income above pension. Not sure they’d really want to come at that.

    • 0
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      What is this ‘Sock it away’? I’ve never heard of it.

    • 0
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      Check in google

      Phrasal Verbs: sock away Informal. To put (money) away in a safe place for future use.

    • 0
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      There is never ever going to be a Universal Aged Pension.

      Such a beast is anathema to the LNP, and Labor has done nothing to implement anything remotely like it, and won’t.

      Such an open ended scheme would cost untold billions of dollars and no government of any colour has that sort of money to toss around.

      You can dream all you like, but it ain’t gonna happen. Get over it and move on.

    • 0
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      Yes you need to have all your facts before you start doing paperwork to get New start….my son applied after being on Workcover for a few years and…had to go on Newstart at that end, and because he had more than $5000 in his bank the “day” he applied (I went and payed surplus on his house leaving only $5000) the day after….he had to live on that money for 7 months….wish I had known the day before…..

  3. 0
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    I agree with Johnp and about time self funded retirees get rewarded with discount rates just like pensioners get who pay there rates with money from the public purse. And yes. I paid taxes all my working life and still paying now.

    • 0
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      You have a fair point there about discounts and such – hardly seems fair, and all are retirees, after all. In the case of the very well-off retirees – do you recommend a cut-off point? That’s always the rub…. some will inevitably miss out and that will be cause for ongoing argument and strife.

      BTW – everyone pays tax with every purchase or spend.

  4. 0
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    That’s great news.

    Now my age pension, which I was promised, and for which I foolishly
    worked hard, paid tax, and saved for a bit extra, has gone up from $0 to $0
    and that bit extra I can use up until it’s all gone to give me less income than
    the full age pension itself.

    That’s the land of the fair go for you.
    How good is that?

    • 0
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      ???????????????????????????

    • 0
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      adbob is saying that the actual pension is not rumoured to go up – and the actual effect will be minimal and restricted to those at or near the top of the part-pension chain.

      As I said above – if the discussion was about an actual pay rise for pension, it’s a different story. The headline is misleading. some may benefit from changes – most will not be affected in any way and you can guarantee that the government has calculated it to a nicety.

  5. 0
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    That’s fine for pensioners who have investments. What about those who don’t and are the most needy.

  6. 0
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    The only ones who will really spend the money are the likes of Newstart and renting pensioners not part pensioners who have additional funds. If you have money you have options so it needs to go those who have no funds apart from the next centrelink payment.

    • 0
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      I agree anyone with low income does not save any money and spends it all, most goes on rent, bills and food. Anything extra may go to buying clothing if you are lucky.

    • 0
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      True, we are on a full pension – no extra income.
      The first week we buy groceries, fill the car up, pay the rent and save a proportion for monthly / annual bills. The leftover is usually spent on things that need fixing etc. so the next week is a “no spend week”.
      Give us an extra $50 and mate, it wouldn’t be hoarded, it would be spent!
      Economy stimulated!!

  7. 0
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    the ‘LUCKY’ country yes for some…
    typical of this bloody government let people who already have money get even more..what about the poor buggers who through circumstances exist fortnight to fortnight

  8. 0
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    A Deeming rate cut ?wooeedoo! this will be a great help to people with money to be deemed on and not one cent for the folk with nothing ,They will still have nothing So Lnp,thanks for nothing

  9. 0
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    A Deeming rate cut ?wooeedoo! this will be a great help to people with money to be deemed on and not one cent for the folk with nothing ,They will still have nothing So Lnp,thanks for nothing

  10. 0
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    They also need to increase the asset threshold. It’s too damn low!!!!
    It’d also be good if they reverted to the taking off of $1 × every $1000 over the asset threshold instead of $3. This is killing us!

    • 0
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      The 2017 changes to the Pensioner Assets Test was a con job by the LNP. No other demographic has done any lifting for the Budget Emergency since

    • 0
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      I agree with you both, Blinky and Mad as Hell. The change in the assets test has left many of us struggling. It’s hopeless trying to plan with this government.

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