6th May 2019
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Centrelink Q&A: Are age pensioners being robbed?
Author: Ben Hocking
deeming

Deeming rates are set at 3.25 per cent, but a good interest rate for a long-term deposit would not get near that, says Betty. So why can’t it be changed?

Q. Betty

Why are deeming rates set at 3.25 per cent when the best interest on term deposits is no more than about 2.8 per cent and that may be cut soon. It seems like a steal and something the Government – whoever we end up with – should revise.

A. Deeming is a set of rules used to work out the income from your financial assets.

In a bid to reduce the complexity when assessing Age Pension entitlements, the Social Services Department expects that recipients who have more than $51,200 in savings or other financial assets should be investing them in such a way as to earn at least 3.25 per cent in interest.

Savings of up to $51,200 are assumed to be earning at least 1.75 per cent.

If you’re a member of a couple and at least one of you receives a pension, the first $85,000 of your combined financial assets is deemed to earn a rate of 1.75 per cent a year. Anything over $85,000 is deemed to earn 3.25 per cent.

If you’re a member of a couple and neither one of you receives a pension, the first $42,500 of each of your own and your share of joint financial assets is deemed to earn 1.75 per cent a year. Anything over $42,500 is deemed to earn 3.25 per cent.

These are the deeming rates the Government uses to assess how much income you should potentially be earning from your financial assets, regardless of what interest you are actually earning.

The current Centrelink deeming rates and thresholds, as of 1 July 2018, are as follows:



Family situation

Assets threshold

Rate of deemed income

Single

$0 – $51,200

1.75%

Above $51,200

3.25%

Allowee couple - per person (1)

$0 – $42,500

1.75%

Above $42,500

3.25%

Pensioner couple - combined (2)

$0 – $85,000

1.75%

Above $85,000

3.25%




The rates have been set by the Minister for Social Services based on information the Government collects about how money markets are performing and the potential returns available to savers and investors.

The rates can be raised or lowered depending on the average markets returns and to reflect the interest rates (or cash rate) set by the Reserve Bank of Australia (RBA).

However, although the returns and interest rates are regularly monitored, the reality is that Centrelink deeming rates are not commonly amended.

Although they can be amended at any time, to minimise disruption, any changes usually coincide with the twice-yearly indexation of Age Pension payment rates or income and asset thresholds. The thresholds are indexed annually, on 1 July, in line with the Consumer Price Index (CPI).

To assess current term deposit rates, a good website to check out the options is Canstar.

The absolute best term deposit rate was 2.85% for a 12-month $50,000 deposit – still well under the 3.25 per cent deeming rate.

Would you like to see deeming rates adjusted more regularly? Should it be a priority for the next Government?

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    COMMENTS

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    HDRider
    6th May 2019
    10:17am
    Use the stock market and stop whinging!
    ozrog
    6th May 2019
    10:37am
    Really. Thats not a good comment or helpful.
    Stock market is not returning anywhere near what it use to as most super funds will report at EOFY.
    Rae
    6th May 2019
    12:29pm
    ozrog In the last three months Australian share index returned 10.92%, International shares 11.50% to 12.59 ( hedged), property index 14.38%, bonds 3.07%

    Tern deposit 0.52%

    Super funds that can't match the index need to explain exactly what they are doing. Outside of super the cost of an index fund is 0.24%

    Believing super is the only game in town is quite silly. If accumulating you also pay 15% tax on top. How stupid is that.

    Someone with $800 000 invested in diversified index funds would have made between $48 000 and $60 000 in the last three months alone.

    What was that about sharemarkets again?
    Farside
    6th May 2019
    1:09pm
    it is not always practical for a non-professional to take a risk on shares or other traded assets in the short-term as they cannot risk the possibility of losing capital intended for other purposes. It is easy to guess the markets in hindsight.
    sunnyOz
    6th May 2019
    2:12pm
    Perhaps OK for younger pensioners..but not for older pensioners, with no computer, and little to no knowledge of shares, markets, etc. I agree the returns for shares, etc are better than miserly bank accounts, - BUT many older people have only been brought up with banks.

    I know plenty of pensioners - many in mid 80's onwards - who would not have a clue about anything but banks. And at this late age - don't want to. That is all they have known. And it is ALWAYS said - if you don't understand it - don't do it. And it is wrong that every cent is 'deemed'. You're every day bank account should not be deemed - should be allowed to have at least $5,000. It is wrong that elders should be punished simply trying to survive.
    Greg
    6th May 2019
    6:35pm
    Rae - using three months of figures to determine you should invest in shares is ridiculous, sure the three months have been good but another three months could see those returns totally gone, even a loss is possible.

    And like sunnyOz stated older people aren't comfortable with shares and with good reason, just look at where our market is today, still below the highs set before the GFC. So ten years to only get near the high, older people just don't have the time to let the market recover, they're likely to be dead.
    Farside
    6th May 2019
    9:23pm
    Greg is right, take Rae's example to the extreme and look at the 0.9% that the market lost today, i.e. lost in a single day ... imagine if this was repeated on a regular basis.
    Rae
    7th May 2019
    10:03am
    Yes Greg.

    Investing can be quite scary, requires a lot of work and is risky,

    It's very odd that Shorten thinks people who invest in shares are "wealthy" . They are quite possibly crazy.
    Misty
    6th May 2019
    10:59am
    Maybe if it is adjusted more often it would mean more work for Centrelink and they don't want that so they just leave it as it is if no one complains.
    Infinityoz
    6th May 2019
    11:10am
    Trouble is, who do you direct complaints to? The Minister? The CEO of Centrelink? Your local member? This government is very careful to make sure there is nobody to whom complaints can be directed! Vote them out on May 18 :)
    TREBOR
    6th May 2019
    11:10am
    Colonel C'Link has many part-time casuals these days - the labour force is simply not up to much due to their lack of training and daily experience. Their management structure, of course, suffers from the Howard Way and contracted higher management, under the gun of the government of the day, so they are supine and over-willing to kow-tow to their owners.

    I'd say the issue was more their inability to do the job. Just look at the stories around about simple errors in calculation.
    TREBOR
    6th May 2019
    11:22am
    How do you take a stick to a corporation? They have no nose to punch and no knee to kick...

    ... for InfinityOz. Someone said that a long time ago about companies etc... GuvCorp is no different.... like launching an all-out attack on a mountain made of sponge...
    Rae
    6th May 2019
    12:31pm
    Like adjusting the IT system? Something is terribly wrong with Centrelinks system by the stories you hear.
    gold miner
    6th May 2019
    11:59am
    I was receiving the full age pension and had about $100K in super however when my fund closed down and merged with another industry fund apparently it was arranged this would not affect the age pension however Centrelink decided I had chosen to move to another fund. I lost over $100 in fortnightly age pension. I have written to the Appeals Officer, a Complaints Officer and again to Centrelink. My letters and supporting evidence are on my file according to the last person who saw me at Centrelink yet for 9 months I have never received any response what so ever.Even my local federal MP seems to have got nowhere on my behalf. next step is the Ombudsman but how effective that is remains to be seen.
    PlanB
    8th May 2019
    12:38pm
    gold miner ---We had a meeting here in 2016 --there where about 700+ turned up -- and the same thing was happening to so many -- I have also been in touch with the minister in charge a few times and heard NOT A WORD
    Maybe Now b4 the election might be a GOOD time to ask for an answer -- as there is NO way you can get the said rate
    Older lady
    6th May 2019
    12:01pm
    It should be the rate savings would get in the bank. Full stop.
    PlanB
    6th May 2019
    12:12pm
    It is a bloody disgrace that we are being deemed to be getting 3.25% -- you can get NO WHERE near that even with a term deposit -- and as far as some fool saying use the stock market -- well the higher the interest the higher the risk I like to know my money is safe _ I have worked to darn hard to lose it.

    Highest I can get for 3 months is 2.38

    Time we got answers from these 2 mongrels as to what the **** they are going to do about this as I have been asking this lot for years now and NEVER had and answer YET!
    Rae
    6th May 2019
    12:35pm
    What makes you think your savings in a bank are any safer than in the sharemarket right now?
    FREDDIE
    6th May 2019
    12:58pm
    Rae, the Federal Government guarantee all bank accounts up to $250,000 each, that is why some people prefer to have the safety of a guaranteed bank deposit over the speculative stock market!
    Rae
    6th May 2019
    1:32pm
    Yes FREDDIE but only $20 billion each bank institution which is nowhere near the sums of savings on deposit. Like all Government they promise a lot but don't hold your breath waiting for them to deliver.

    In other words it isn't all bank deposits guaranteed.

    The Government also passed the Bail In legislation last year too which negates the guarantee anyway from what I can make out. Deposits can be taken to cover bank balance sheet debt in a GFC or Australian banking crisis.
    Farside
    6th May 2019
    9:34pm
    Rae, can you point to where the weasel words are writ limiting the guarantee to $20B for an ADI. I was under the impression it was an unconditional guarantee up to $250K per ADI but would like to know if this is not the case.
    Rae
    7th May 2019
    10:10am
    It was in a few articles about the guarantee I read in the AFR.

    Search Australian Bank Guarantee restrictions online also APRA Bail In legislation will bring up that info.

    There was an article that stated the actual bank deposit figures and also talked about the $20 billion limit.

    Like you I though it was a $250K guarantee for every depositor.

    Hopefully we will never need to find out for real. Banks do seem to be more careful about lending now and so far our banking system appears strong.
    Farside
    7th May 2019
    11:44am
    ok Rae, I suspect there is some confusion and selective fear mongering, though I am not expert in bank law. The discussion seems to revolve around s16AD of Banking Act 1959.

    My take is it's not a bail-in but more like insurance if the bank fails:
    -There is a standing appropriation to the FCS account of $20B.
    -APRA can request a maximum of $20B at a time.
    -The balance in the FCS cannot exceed $20B.

    It seems the story originates in Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008. https://www.ozbargain.com.au/node/417522

    SImply put the quote can be paraphrased the amount that can be appropriated for the purposes of meeting depositors’ entitlements is unlimited for the first three years of the scheme. After three years, the maximum that can be appropriated is $20 billion.

    The reality is 90% of deposits are held by fewer than 10% of ADIs, principally the top seven banks, and domestic savings accounts in these banks will be guaranteed to $250,000 per person per ADI. Could they go bust, possibly, but we will have much more immediate problems to deal with if that eventuates.
    PlanB
    8th May 2019
    1:02pm
    I have just rung APRA and spoken to a person there and there is still the bank guarantee of $250 here is the site and the Number I called

    https://www.apra.gov.au/contact-us


    Phone numbers
    General enquiries

    1300 558 849 (free call) or
    +61 2 9210 3000 (international +61 2 8037 9015).

    Our call centre is open Monday to Friday from 9.00 am to 5.00 pm (Australian Eastern Standard Time) except for public holidays.

    Also can do a check here

    https://www.fcs.gov.au/
    Mad as Hell
    6th May 2019
    1:27pm
    Put your spare cash under the bed and get 7.8% p.a.
    For a part pensioner (home owner) couple under the Assets Test,
    Your pension reduces by $3 a fortnight for every $1000 over $387,000
    $3 x 26 = $78
    $78 for $1000 is 7.8% p.a. return
    Simples.
    Thanks to Scott Morrison our LNP economic manager.
    Just watch out for the commies.
    Rae
    6th May 2019
    1:37pm
    Yes the winners obviously paid off a home. Saved cash for extra expenses and receive the full pension and concessions.

    With interest rates so low holding cash isn't losing much interest but may be losing a fair bit of pension money.

    Sure beat saving like crazy every fortnight and going without to fund yourself.
    Cowboy Jim
    6th May 2019
    2:55pm
    You got it right and that is why they change the notes all so often, you have to get them from under the bed and change them into new ones. Mad as Hell - in my neck of the woods I still come across the Grey Ghosts $100 notes. Nothing wrong I accept them and the bank puts them on the account after looking at them thru a special light.
    Cowboy Jim
    6th May 2019
    3:34pm
    Mad as Hell - did I read you right? You actually mean $10'000 under a bed is worth $780 extra pension income? Seems almost inconceivable to understand a Govt trying that one on.
    Mad as Hell
    6th May 2019
    7:16pm
    Cowboy Jim this is my logic and feel free to point out any flaws.
    Working on a homeowner couple.
    Part pension finishes at $853,000
    Taper rate cuts in at $387,000
    ——————
    Equals $466,000 Under the bed and get the full pension $32,536

    $32,536 return on $466,000 is 6.98%
    Still better than the deeming rate?

    There are only commies under my bed. My investments are some shares and an industry retirement fund.
    My beef is the government tinkering/ stealing pensioners assets after decades of planing and doing without to have rule changes after one retires.
    The 2017 changes to the Pensioner Assets Test only encourages one to be a leaner and save no more than $387,000 and claim a full pension.
    As I’ve said before most retirees who have only been in compulsory super since 1992 have not had the benefit of compounding returns.
    Farside
    6th May 2019
    9:43pm
    Fair point Mad as Hell, do you have any cunning suggestions on how to take the $466,000 away from plain sight and hidden under the bed? Presumably this is best done five years before qualifying for pension to avoid gifting provisions.
    Cowboy Jim
    7th May 2019
    8:39am
    Mad as Hell - thanks for the explanation. And Farside has a point about taking the money out of accounts to shift under one's bed. Checked under mine and found quite a bit of dust as well as a $2 coin.
    Misty
    7th May 2019
    10:42am
    Love your sense of humour Cowboy Jim, it brightened my morning.
    Farside
    7th May 2019
    11:51am
    Cowboy, I am interested to hear Mad as Hell's plan. I sold a car a while back with declared sale at min redbook value, which was half the actual sale price. Buyer paid less in tax and I got $4000 cash to keep in a sock in the drawer; it was a good feeling while it lasted :D
    floss
    6th May 2019
    2:18pm
    This present Fed. Gov . has done little for pensioners except make it hard to contact C.Link.
    floss
    6th May 2019
    2:23pm
    Gold miner have your case reviewed by a Tribunal they are more than fair and know what C.Link is up to.
    Old Man
    6th May 2019
    3:24pm
    The system of how rates are determined appears fair as it takes an average of what is available while taking into consideration the RBA's adjustments. What does not appear fair is that adjustments are only made once or twice each financial year. Surely we are well into the computer age and adjustments monthly in line with the RBA's deliberations can be made.
    floss
    6th May 2019
    4:35pm
    Are all LNP. members like Robbo ,I think so.
    TREBOR
    6th May 2019
    6:16pm
    Nah - he's a pure mental case - LNP people are very impure mental cases....

    6th May 2019
    5:50pm
    Deeming rates should be abolished if you cant invest with the government at the rates they set
    TREBOR
    6th May 2019
    6:16pm
    Government bonds, you say? Hmmm ....
    Farside
    6th May 2019
    9:53pm
    Trebor, you're a very naughty boy. I suspect 3.25% bonds would sell like hotcakes.
    Tricky
    6th May 2019
    6:40pm
    If the deeming rate is 3.25% and the Govt assumes we can receive this amount, why don't they the LNP Federal Government offer Australian bonds at the rate of 3,25% for eligible senior citizens. The LNP would much prefer to obtain a benefit by deceiving our senior citizens who contributed to making this a great country.
    Bren
    6th May 2019
    8:46pm
    Thought I might mention that you lose half a dollar of pension for each dollar deemed , so that to break even you really only have to earn half of 3.25% or 1.625%, which is easily achievable.
    Bren
    6th May 2019
    8:46pm
    Thought I might mention that you lose half a dollar of pension for each dollar deemed , so that to break even you really only have to earn half of 3.25% or 1.625%, which is easily achievable.
    Golden Oldie
    6th May 2019
    9:26pm
    If you’re a member of a couple and neither one of you receives a pension, the first $42,500 of each of your own and your share of joint financial assets is deemed to earn 1.75 per cent a year. Anything over $42,500 is deemed to earn 3.25 per cent.
    That does not make sense, if neither one receives a pension, then deeming is irrelevant. It is only used to calculate the pension amount.
    Rosret
    7th May 2019
    7:18am
    Anyone who has savings under a certain amount and who is over the designated age is entitled to a part pension.
    To work out whether they qualify a 3.25% deeming rate is set on the future interest they may earn on their savings.
    For those who have invested anywhere else but a bank then their returns will most likely be higher than 3.25% Long term investors in bank term deposits will still be getting more than 3.25% and people who invest in bank dividends will be getting better value.
    Its an average.
    You can't let money snooze in a bank or it will lose value. Despite the fact share holders will pay for the banks misbehaviour the banks are still profiting at $14 Billion this last year.
    The bank customer really has to change their thinking and see the bank as a safe service utility and not a place to invest money.
    Cowboy Jim
    7th May 2019
    8:51am
    Rosret - some of us are reluctant to invest in vehicles where the small print at the bottom always reads: "Indicated returns are past returns and not a guarantee of future performance. Investors may lose part or the whole principal invested." We cannot afford that and so we are forced to put our money into financial institutions, not necessarily banks. Could be building societies, credit unions. The Military Bank used to offer deeming rates, it is in Canberra and I would not know how to get the money there without PC banking which I do not want to do.
    Farside
    7th May 2019
    11:56am
    Cowboy, don't think they offer deeming rates now. https://www.australianmilitarybank.com.au/term-deposits

    They have branches all over the country if online banking is not your thing.
    https://www.australianmilitarybank.com.au/find_a_branch
    Cowboy Jim
    8th May 2019
    10:22am
    Thanks Farside - checked it out. Deeming rates are out but they still offer a bit higher rates than the big Four.
    PlanB
    8th May 2019
    1:03pm
    I have just rung APRA and spoken to a person there and there is still the bank guarantee of $250 here is the site and the Number I called

    https://www.apra.gov.au/contact-us


    Phone numbers
    General enquiries

    1300 558 849 (free call) or
    +61 2 9210 3000 (international +61 2 8037 9015).

    Our call centre is open Monday to Friday from 9.00 am to 5.00 pm (Australian Eastern Standard Time) except for public holidays.

    Also can do a check here

    https://www.fcs.gov.au/
    PlanB
    8th May 2019
    1:41pm
    I have also found this

    Australia’s Scary New Bank Bail-in Laws


    https://bradjamesmatthews.com/australia-new-bank-bail-in-laws/

    Is this what you were speaking about Rae?

    I have once again rung the APRA and they insist the guarantee is still there
    Farside
    8th May 2019
    2:42pm
    PlanB, the issue is not the $250,000 per depositor per ADI but rather whether there is a $20B cap on the aggregate of guaranteed deposits per ADI. So you need to ask APRA a different question.
    PlanB
    9th May 2019
    1:50pm
    Farside could you please explain -- --also I might add I do not have any Super ---if that what it is about, I would be very please if you can give me more info re what you stated -- thanks
    PlanB
    12th May 2019
    8:18am
    Waiting on a reply Farside????
    David
    21st May 2019
    1:31pm
    The unfortunate reality here is, that most pensioners assets would naturally include their home. This, regardless of value, should be exempt from such deeming...
    PlanB
    21st May 2019
    3:46pm
    Well at the moment it is exempt David, My God I hope it stays that way.

    The home is not treated as an assent


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