As the cost of living continues to rise, Australian pensioners are facing yet another potential financial hurdle. Politicians are being called upon to clarify their stance on a critical issue affecting the payments of nearly 900,000 Centrelink recipients, including 450,000 pensioners.
The topic at hand is the deeming rates, a mechanism that could significantly impact the financial well-being of many older Australians if altered.
Deeming rates are a set of figures used by the government to estimate the income generated from a person’s financial assets, such as savings accounts, shares, and superannuation. These rates are used to calculate income for the purposes of determining eligibility for various payments, including the age pension, JobSeeker, and parenting payments.
The crucial point to understand is that the government assumes this rate of return on your assets, regardless of the actual income you earn from them.
For the past three years, deeming rates have been frozen, with the lower rate set at 0.25 per cent and the upper rate at 2.25 per cent. This freeze was initially implemented by the former Coalition government as a cost-of-living measure and was extended by the current Labor government in the last federal budget. However, this freeze is scheduled to expire on June 30, 2025, and there’s growing concern about what will happen next.
The uncertainty stems from mixed signals from the government. While initial indications suggested that the freeze might continue for another year, the government has not committed to this path, leaving open the possibility that deeming rates could increase. If they were to rise in line with the Reserve Bank of Australia (RBA) cash rate, it’s estimated that a single age pensioner could be up to $3,300 a year worse off.
This potential change has sparked a call to action from advocacy groups representing older Australians. They argue that with the cost-of-living crisis already putting a strain on those with fixed incomes, any additional reduction in Centrelink payments would be unjust and exacerbate financial stress.
COTA Australia’s chief executive, Patricia Sparrow, has emphasised the dire situation many pensioners find themselves in. ‘To expect people to deal with a drop of more than $3,000 on top of what they’re currently trying to cope with is unreasonable at best,’ she said. ‘The latest indexation adjustment to the Age Pension in March wouldn’t even allow a pensioner to buy a coffee per week.’
Similarly, Chris Grice, CEO of National Seniors Australia, has called for any changes to deeming rates to be gradual, transparent, and considerate of the pressures faced by Australians. ‘This can’t be a matter of wait and see. For our political parties to attempt to sneak through changes to deeming rates after the election would be outrageous,’ he said.
The political landscape remains murky, with both major parties not providing clear answers about their plans post-freeze. Prime Minister Anthony Albanese has suggested that Labor has historically set deeming rates lower than the cash rate but stopped short of making any promises. The Coalition, on the other hand, has stated that it is not proposing any changes to the scheduled assessment of deeming rates.
As pensioners and other Centrelink recipients wait for a definitive answer, the message from advocacy groups is clear: any increase in deeming rates must be approached with caution and compassion. With the cost of living already a significant concern, the last thing older Australians need is a ‘sneaky attack’ on their pension payments.
How do you feel about the potential changes to deeming rates? What impact could it have on you or your loved ones? Let’s discuss and support each other through these challenging times.
Also read: $1,200 ‘payment’? Centrelink warns of fake cost-of-living scams
What I don’t understand is how the politicians have different rules for them than the average person. We currently have had a zero income for the last 2 years and have had to use up nearly all our savings. We had a rental property which didn’t make much money just the $215 a week as the person was a battling as a single father. We now have the property empty so we can freshen it up to be able to sell so we can keep going. I turn 67 in a few months and my partner is turning 63 & unable to work due to serious injuries from a truck rollover 11 years ago and due to us not being totally broke (YET) we are not entitled to assistance. I had to give up work 2 years ago to care for my partner and was not eligible for a carers pension as he is able mostly to attend to his personal care. Didn’t matter that he has regular falls and would be stuck for hours till I got home to assist him.
The working class people seem to get penalized later in life for saving and not getting assistance from the Government, yet politicians have more benefits even though their wages are something we would love to earn for one year.
I think if cuts are to happen it should be at the TOP of the chain not with the people who have kept working to make Australia the best place to live.
Surely deeming rates must surely rise. They have been artificially kept low pending this election.
To lose $3300 per year in age pension due to higher deeming rates means a pensioner has significant financial assets. The 0.25% rate for the first threshold, plus the 2.25% for the second threshold, is significantly less than the actual interest rates currently paid on term deposits (4.6- 5.1%).
We all know the day of reckoning for any Government is approaching – deeming rates are only one of many measures that will need to be addressed.
I would remind twig that interest rates are no longer 4.6 to 5.1%
Yesterday the best I could do after ringing around was a credit union with 4.00% interest paid on maturity!…for 12 months.
This was not my preference as I really need the interest each quarter.
However paid each quarter was 3.4%.
At the next RBA meeting there are suggestions that the rates will fall again.
I do not get and neither do I want a pension but the seniors health card is important to me as I am terminally I’ll.
Agree that many measures need to be addressed but I would not trust Labor to do anything tout social engineer money disproportionately.
I did know not that the Libs had said they would keep the current deeming rates so they will Now have my vote.
My heart goes out to those on pensions who don’t own their own home.
Hammo I also have a term deposit maturing on the 15th May (the day the Reserve Bank meets). My best rate so far for one year is 4.8% (State Bank of India – but not sure I want to invest with them) and next is Judo Bank 4.5% with whom I already hold a maximum govt guaranteed term deposit. So I am now looking at Bonus Saver accounts and RACQ is paying 5% if you deposit $100 pm – if you do not deposit $100 then the base rate is 0.01%. I know those rates will fluctuate with the Reserve Bank decision but it is an option.
St George also has an Incentive Saver Account that is currently paying 4.9% is you deposit $50 pm but we are already near their limit of allowed dollars so cannot dump the Term Deposit into it.
The higher interest rates of the last 18 months or so have been good for self-funded retirees, but it looks like we are headed for 2.5% rates again.
This current Government and the Opposition must wake up. Already they have increased payments for people with children but regarding us on a Disability Pension nothing. I do not have any assets so I totally rely on my Pension every two weeks. All my.life I have worked hard and this is the thanks I get. Thoughts on this please.
its alright to have children u cannot afford no matter what the circumstance is
the GOVT LOOKS LOOKS AFTER SINGLE PARENTS BETTER THAN THE AGED PENSIONERS AND VETS WHO HAVE BROUGHT UP THEIR CHILDREN WITH NO GOVT HELP
PEOPLE CANNOT STOP GETTING OLD OR SICK BUT U CAN StOP HAVING CHILDREN YOU CANNOT SUPPORT ON YOUR OWN
WHY IS IT ALL WORKING PEOPLE CAN NOT ONLY GET PAY RISES AND TAX CUTS 10 TIMES GREATER THAN THE LAST PENSION INCREASE
ALBANESE STATED ON NATIONAL TV THAT THE CPI WAS %2.4 and yet gave pensioners and vets %.04
I DONT KNOW WHY DUTTON RAN FOR PREMIER BUT I WOULD NOT PUT IT PAST THE GOVT TO DELIBERATELY NOMINATE A MAN WITH BAD POLICIES TO RUN FOR PREMIER SO AS THE ONLY OTHER OPTION is to vote for someone else
THE OTHER THING I DO NOT LIKE IS IF U VOTE FOR SOMEONE OTHER THAN ALBO AND DUTTON THEY CAN STILL BUY YOUR VOTE FROM OTHER PARTIES
THE GREENS VOTES WENT TO ALBO AT THE CHEAP PRICE OF NEARLY $2 million dollars of tax payers money
why vote at all if preferential votes go to people u do not want to vote for in the first place
As a pensioner who receives a part pension from the UK, I have had to put with ridiculous deeming rates used by Centrelink. I have been a pensioner since 2017(I worked an extra 2 years, after when I could have retired, to improve my super balance), and I have never received the amount from the UK that they have determined. Any other business who scams people are usually taken to court, but not the government. It seems they can do as they like with no consequence.
Deeming rates should be abolished, just another money grab by govt.
Also unfair is that self funded retirees who have too much money to get a full or part pension are robbed. For their working lives they have paid tax, about 6% went into the govt pension fund and they should at least be entitled to that back.
Not this nonsense about the government pension fund again. Absolute rubbish. There were no account numbers tying people to any fund. Women who never worked are able to access an age pension. But still this long debunked rubbish gets brought back up like the dogs dinner of last night.
Would you rather you have to declare your actual interest, or have Centrelink use the information ATO has access to, rather then have artificially low deeming rates used?
Taragosun.hi, I too am maxed out with judo who I trust.
The other top ten offer all sorts of interests for the first so many months with the deposit of so much on a regular basis, much like a day to day account.
The couple of RaC,s I was not happy with.
I have a couple of term deposits due at end of May and won’t be happy with rate as we might get a small cut.
As I am beyond 75 I have to predict my death so I can withdraw my super before death so my estate doesn’t pay tax on the super balance.
I am not complaining but the super tax is substantial.
Cheers
Deeming rates should stay as is, it’s most likely the reserve is about to start slashing the official cash rate so any increase will adversely affect those with investments. If the rate falls below 3% then deeming rates need to follow suit. My bank has cut rates by .75% compared to the official cut of only .25% so it is getting harder to get ahead without the govt making it harder still
During the budget it was announced that they were remaining frozen until 2026. The Financial Review even reported it as such although other than that one article I can’t find much more about it. Is it just another Labor lie?