Are deeming rates unfair?

Deeming rates cause much consternation, largely due to the fact that for many people with money in term deposits and savings accounts, the rate at which their income is deemed is usually higher than the actual rate of interest paid. Brian is one such member who is incensed at the unfairness of the measure.

Q. Brian

Are you aware that at least some of the major banks, if not all by now, have reduced their interest rates on pensioner deeming accounts to 0.25 per cent below the deeming rates used by Centrelink?

I have tried to get politicians on both sides interested in this, but I am finding that my messages are not being returned, and when I get to speak to a staffer, there is very little interest – the setting of Centrelink deeming rates has apparently had bi-partisan support.

I wonder how many pensioners are actually aware of this matter.

A. Many of our members will be more than aware of the negative affect interest rates (that are lower than deeming rates) have on their overall financial position.

You are indeed correct when you say that the setting of deeming rates by the Government is done so with the support of the Opposition, so forcing any change will be unlikely.

It’s important to note that the purpose of deeming rates is to average the earnings from investment so that you do not need to supply detailed information and paperwork to Centrelink in order to claim an Age Pension. Such paperwork would slow down the process of assessing Age Pension eligibility and determining how much Age Pension should be paid.

It is also worth noting that deeming rates are not only designed to take into consideration income from saving accounts and term deposits, but also income from all investments, such as shares, account-based income stream and managed investments. Many of these investments mean you actually get a return greater than the rate of deeming.

The current deeming rates from March 2015 are:

Family Situation

Assets Threshold

Rate of Deemed Income

Single

$0 – $48,000

1.75%

Above $48,000

3.25%

Allowee Couple – per person (1)

$0 – $39,800

1.75%

Above $39,800

3.25%

Pensioner Couple – combined (2)

$0 – $79,600

1.75%

Above $79,600

3.25%

Do you agree with Brian? Should more be done to help those who rely on savings accounts and term deposits? Or are deeming rates the fairest way to assess multiple income streams without having to submit complex and detailed paperwork?

Written by Debbie McTaggart

RELATED LINKS

‘Deeming’ accounts to disappear

ASIC forces banks to come clean on deeming accounts

Deeming rates in detail

Deeming rate thresholds will change from 1 July 2016

Will my pension be deemed?

Legislation has been introduced which will result in the deeming of account based income streams.



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