If you’re a pensioner or approaching retirement, you’ve probably heard the term ‘deeming rates’ thrown around—and perhaps wondered what all the fuss is about.
Well, the fuss is real, and it could soon hit your hip pocket. With the government signalling that the long-standing freeze on deeming rates is set to end, thousands of older Australians are left in limbo, unsure how their pensions and entitlements might change after 30 June 2025.
Let’s break down what’s happening, why it matters, and what you can do to prepare.
What are deeming rates, and why do they matter?
Deeming rates are a set of rules the government uses to estimate how much income you earn from your financial assets—things like savings accounts, shares, and term deposits.
Instead of looking at your actual returns, Centrelink ‘deems’ that you’re earning a certain rate, regardless of whether your investments are performing better or worse.
This deemed income is then used to calculate your eligibility for the Age Pension, the Commonwealth Seniors Health Card (CSHC), and even aged care fees.
In short: if the deeming rate goes up, Centrelink assumes you’re earning more from your assets, which could reduce your pension payments or even affect your access to valuable concessions.
A brief history of the deeming freeze
Back in May 2020, as the pandemic and cost-of-living pressures hit hard, the government froze deeming rates at record lows: 0.25 per cent for the first $62,600 of assets for singles (or $104,800 for couples), and 2.25 per cent for anything above that.
This move was a lifeline for many, ensuring that pensioners weren’t unfairly penalised while interest rates were rock-bottom.
Since then, the freeze has been extended several times, most recently until 30 June 2025. But with no mention of a further extension in this year’s federal budget, the writing appears to be on the wall: the freeze is likely to end, and the rates could be reviewed—and potentially increased—after that date.
What happens after 30 June 2025?
Here’s where things get a bit murky. The government has confirmed that the freeze will end on 30 June 2025, but insists that any change to the actual deeming rates will require a formal decision by the Minister for Social Services.
In other words, the rates won’t automatically jump overnight, but they could be reviewed in light of current economic conditions.
And those conditions have changed dramatically. The Reserve Bank’s cash rate, which was just 0.25 per cent in May 2020, has since soared to 4.10 per cent before a recent cut to 3.85 per cent. With interest rates rising, there’s mounting pressure for deeming rates to follow suit.
What could this mean for your pension?
If deeming rates are increased, Centrelink will assume you’re earning more from your assets, even if your actual returns haven’t changed. This could mean:
- A reduction in your Age Pension payments
- Loss of eligibility for the Commonwealth Seniors Health Card (and the valuable concessions it brings)
- Higher aged care fees for those in residential care
For many retirees, even a small change in income can make a big difference, especially with the cost of living still biting hard.
What are advocacy groups saying?
Organisations like National Seniors Australia and the Council on the Ageing (COTA) are urging the government to keep the freeze in place, arguing that many older Australians are still struggling to make ends meet.
They point out that while interest rates have risen, not all pensioners have been able to take advantage of higher returns, especially those with money locked in low-interest accounts or who are wary of riskier investments.
National Seniors has also floated the idea of scrapping the Work Bonus (which allows pensioners to earn up to $300 a fortnight from work without affecting their pension) in favour of a system where retirees can claim the full pension and simply pay tax on any extra income.
The government, however, maintains that income and asset tests are essential to ensure support goes to those most in need.
What can you do to prepare?
While the future of deeming rates is still uncertain, there are a few steps you can take to protect your finances:
- Review your assets: Make sure you know exactly what financial assets you have, and how they’re currently being treated under the deeming rules.
- Seek advice: Consider speaking to a financial adviser or Centrelink’s Financial Information Service to understand how potential changes could affect you.
- Stay informed: Keep an eye on government announcements and advocacy group campaigns. The more you know, the better prepared you’ll be.
- Engage with your community: Share your concerns with local MPs, join advocacy groups, and make your voice heard. The more pressure the government feels, the more likely they are to consider the needs of older Australians.
The bottom line
The end of the deeming rate freeze could have real consequences for pensioners and self-funded retirees alike. While nothing is set in stone yet, it’s important to be proactive, stay informed, and make your voice heard.
Have you been affected by deeming rates in the past? Are you worried about what might happen after June 2025? We’d love to hear your thoughts and experiences—share your comments below, or send us a Letter to the Editor. Your story could help shape the conversation and ensure that the needs of older Australians remain front and centre.
Also read: Age Pension changes? Centrelink says scammers are on the hunt—here’s what to know
What, share your concerns with yiur local MP? Didn’t ‘we’ just do that and overwhelmingly voted for these changes. Alternatively, it’s a bit late to now be concerned!
Super savings may end up as ‘fool’s gold’ for some.
Aren’t some of you lucky to soon become a Self Funded Retiree.
“ The government, however, maintains that income and asset tests are essential to ensure support goes to those most in need.”
So why not share those life time Super savings with those with no savings?
Who can argue against such proposal?
I have never received the deemed rate when getting my part UK pension. Even as the rate has been frozen, I have never received the rate that they specify. I think that it is a total rip-off to ensure that people do not get what they deserve. I have spoken to people in the Labor party, but nothing changes.
Frank, The deeming rate only applies to investments. Your UK pension is assessed as income.
I question whether deeming rates affect your eligbilty for the Seniors Health Care card as everything I have seen regarding that says that assets don’t affect eligibility, only income.
MJP the deeming rate applies to interest earned on investments and bank accounts, which is income.
To MJP : Your financial assets aren’t just counted in the assets test. They are also deemed to earn an income (because they are counted as investments). Therefore your financial assets definitely affect your eligibility for the CSHC via deeming.