27th Mar 2018
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Age Pension: Should deeming rates be re-adjusted?
Author: Ben Hocking
Are deeming rates too high?

Like many retirees, Karen believes that deeming rates are simply too high, especially when the money is being held by a nursing home.

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Q. Karen
What is the best avenue for protesting to the Government on the deeming rates? I am sick of the Government ripping everyone off!

I just put my 90-year-old dad in a nursing home and he had to sell his house to pay the RAD (Refundable Accommodation Deposit) of $450,000. Then I discover the Government are deeming that $450,000 being held by the nursing home as dad’s income. Surely that is a rip off?

A. The deeming rate on savings for retirees receiving an Age Pension can be unfair. The banks are quick enough to cut their rates on term deposits, whereas the Government is less likely to react with a reduction in deeming rates.

However, with regard to refundable accommodation deposits (RADs), these are assessable when calculating aged care fees, but they are not included in means test assessments when determining eligibility for a means-tested pension from Centrelink or Veterans Affairs. RADs are exempt under both the assets and income tests.

You can ask for a review of a decision about your Centrelink payments by completing a review of decision form.

All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Are you eligible for an Age Pension? Do you know your rights? The RetirePlanner tool has all the information you need.

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    COMMENTS

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    HarrysOpinion
    6th Apr 2018
    11:08am
    At current rates the $450K is deemed to be earning 3.17%pa but the highest rate you can earn on savings is 2.75% , so the government's deeming rate is overestimated by 0.42%pa or $1,896.8 pa But, what if you had the $450K in shares earning 5% pa in dividends? Would you then consider your situation as rip-off? Not likely. Of course, the nursing home will not risk the $450K on shares so the best may get is 3% on term deposit. Do nursing homes pass this earning to compound the $450K or not? What do they do with the interest earned? Keep it for themselves?
    Anonymous
    6th Apr 2018
    11:14am
    Deeming is unfair, but the assets test is more unfair. It ''deems'' at 7.8%++. I cannot understand how anyone can be stupid enough to think that it's good for the country to discourage saving for retirement and punish savers so harshly.
    Anonymous
    6th Apr 2018
    11:16am
    It is not compounded Nursing homes keep it for themselves to make up the shortfall from the persons pension.
    On death or leaving the home you are supposed to get the S450k back.
    Old Geezer
    6th Apr 2018
    12:14pm
    Nursing homes are built on borrowed money so your $450k bond is effectively earning what ever interest rate they are paying on their borrowings. Highly likely your bond is saving the nursing home more than the deeming rate in interest.
    HarrysOpinion
    6th Apr 2018
    9:26pm
    Thanks for the information, Roby.
    TREBOR
    6th Apr 2018
    11:17am
    Of course it's a rip-off. Colonel C'Link rules are always in the best interests of Colonel C'Link - not the 'customer'. Imagine what it will be like if the clown show in Cambra ever hand it off to their 'private enterprise' mates. Then you'll see the real cost of social security.

    Attacks on retirees must cease NOW!
    Tib
    6th Apr 2018
    11:19am
    Can anyone tell me what this RAD is for?
    Old Geezer
    6th Apr 2018
    12:28pm
    To supply capital to reduce the debt on the nursing home with no benefit to you.
    Rae
    6th Apr 2018
    4:04pm
    OG was there any logic to this. Shouldn't it be up to the business to build their premises the same as childcare centres, shops or a hotel or motel for example. To me it looks more like a policy to force the sale of a house to suit the real estate industry and State stamp duties etc.
    Tib
    6th Apr 2018
    4:37pm
    It sure seems a lot of money.
    Old Geezer
    6th Apr 2018
    6:32pm
    Agree Rae logic went out the window on this one. Or was it engineered? I'll say no more.
    Nan Norma
    6th Apr 2018
    11:35am
    Of course its a rip-off. I am getting less than 2.5% interest but being deemed to earn 3.50% which means I am losing money every year, and that doesn't include inflation. So I save money by spending it. Crazy that the government can't see that. Because of the new asset test, my husband and I get less than the full pension.
    FrankC
    6th Apr 2018
    12:00pm
    yeah, my wife and I get a small pension from NZ (approx. $35/month) and that has a marked effect on our Oz pension, C'link won't let you have more than you should, by deducting that amount from our Oz age pension.
    Cowboy Jim
    6th Apr 2018
    12:25pm
    @FrankC - cannot really understand that your $35/month makes a marked effect on your pension. I am getting $100/month from Europe and that makes no difference. You are supposed to be able to earn a couple of hundred a month, not so? C/Link sends me a yearly statement of the amount coming in $A currency.
    Theo1943
    8th Apr 2018
    7:10am
    FrankC, you can have an income of $300 a fortnight per couple, plus you can earn from wages another $250 a fortnight each, without affecting your pension. It will affect your taxable income.
    Thoughtful
    6th Apr 2018
    12:11pm
    Again - no deeming rates if no assets test and everybody is eligible for a basic pension. Tax payable on income over the tax free threshold.
    Cowboy Jim
    6th Apr 2018
    12:28pm
    That is exactly the way it should be and I believe it was the case 40
    plus years ago when I started working in Oz - when the Old Age Pension was a right and not called welfare. BTW: do the politicians call their pensions welfare?
    Lescol
    6th Apr 2018
    2:30pm
    Thoughtful, for once I agree with you! The present rules are discriminatory and we will not be able to resolve the woes we'll face in a few years unless we change direction. A tax payable on income over the tax free threshold system is desperately needed if we are to avoid becoming a nation of slobs and being drip fed by c'link!

    The fed governments cannot be so fickle; planning for retirement takes decades. I personally believe the current mob need to be voted out and the replacements will follow them unless they begin to listen to the people including self funded retirees.

    cheers
    Rae
    6th Apr 2018
    4:19pm
    That was exactly what Whitlam thought too and did back in the day. OF course he planned to pay for it by making all the mines, gas fields and uranium industry publicly owned rather than foreign corporations taking off with the loot. Couldn't have that though could we?

    What a crazy idea that the people should have welfare, health and education services funded by the wealth of their own country.
    GeorgeM
    6th Apr 2018
    7:48pm
    Quite right, Thoughtful and others supporting the idea of Universal Pension for all Individuals of say Age 65 and over with say 15 or 20 years Residence, with NO Tests for Assets, Income or Partners, etc. Just tax everything above that, with a concessional capped limit for Super income - to encourage savers.

    Unfortunately, the current mob of BOTH parties won't do it - so only option is for all Retirees to vote them out by putting them (current seat-warmers) last in preferences. They need to lose their pensions / jobs to understand that retirees are angry and want action.
    Anonymous
    7th Apr 2018
    6:06am
    But who do you vote for, George. They are all the same. And most of them have already secured their fat pension, so they won't suffer any loss by being ousted. Their mates will take over and warm seats until they get a pension. Nobody wants to do anything constructive, and I doubt any of them have the brains to anyway.

    And then we have the problem that 95% of the population is unconscious. We are seeing them on forums all the time. ''Labor is better than LNP, so their policy must be right'' or ''he's got more than me, it's not fair - take it off him''. Even ''too funny, LNP wanted to do it but Labor did it first'' - never mind how harmful it is, much less that there's no evidence to substantiate the claim. And then there are objections because some people actually want to debate the issue and uncover what's really right and wrong - rather than blindly endorsing some useless greedy seat-warmer who lies every time his mouth moves - just because he wears a certain coloured shirt!

    Politicians are doing a brilliant job of dividing to conquer - convincing pensioners that SFRs are all rich tax cheats and the only way pensioners can have more is to steal the SFRs savings; convincing renters that homeowners are all wealthy and should get less; convincing workers that retirees are bleeding the nation dry and their generation ''had it easy'' so it's fair for them to suffer poverty in retirement... It just goes on an on and on and on and on. And sadly the 95% swallow whichever lies are most appealing to them, or are told by the party they like best.
    GeorgeM
    7th Apr 2018
    11:21pm
    OGR, you are right to say "Politicians are doing a brilliant job of dividing to conquer", as we can see from the highly divisive comments on this forum. However, you and I have agreed in another post that the Retirees group is large and can make a difference - if they join together for a good common goal - say Universal Pension.

    The question who to vote for arises often - each has to choose sensibly in their electorate to put at the 1st preference whoever agrees to change the system (to say Universal Pension), or if no one then vote for the most likely alternative to the current seat-warmer. They MUST also put the current seat-warmer LAST in preferences so they have no chance of getting your vote. At least in marginal electorates the large Retirees group could then throw out current seat-warmers. This may not achieve the end results initially, but is a first step to send a strong message that we (Retirees) won't be ignored any more. Next election, adopt the same strategy - that way the next seat-warmer also gets thrown out if they don't help.

    It is important for all to note that MPs need to have a minimum of 8 years in parliament to be eligible to get any pension - so by denying them that length of tenure, we have the stick by which we can beat them into shape!
    Anonymous
    11th Apr 2018
    7:04am
    George, I wish there was someone worthy of a vote in my electorate. We have a moderately decent ALP member who doesn't belong in a party that has no clue about economic management, a rotten-to-the-core arrogant LNP candidate who nobody in their right mind would vote for even if the LNP devised half-way acceptable policies tomorrow; a dumber-then-dumb and thoroughly useless Greenie, and a thoroughly brain-dead independent who wants to change the world by quadrupling the tax rate for anyone earning over $25,000 a year and tripling the rate of all pensions and benefits - oh, and confiscating ALL assets held by anyone over 65 to fund a universal age pension. Well, the UAP is a great idea, but NOT by confiscating everything people have worked a lifetime to acquire.
    Nerk
    6th Apr 2018
    2:20pm
    Some naughty people take their money out the bank and hide it under the mattress, then tell centrelink they are broke, the get the pension, they certainly are stinkers.
    Old Geezer
    6th Apr 2018
    2:36pm
    Yes you can even buy mattresses with zippers now so you can access your money easy and even padlock it.

    Many old ladies have been know to take money out each week in cash walk across the road and deposit the money in their grand daughters account.
    Anonymous
    6th Apr 2018
    2:57pm
    Money in the mattress I once new a bloke who hid money in the mattress and let it be known, he was tortured and killed for it so probably not a good idea.
    Cowboy Jim
    6th Apr 2018
    4:13pm
    Not so easy taking your money out of the bank, normally they need a reason for a withdrawal that would make mattress banking worthwhile. The old lady with the granddaughter is much more believable, know some of them myself. But remember - you have to trust your granddaughter, the account is hers and so is the money.
    Old Geezer
    6th Apr 2018
    6:30pm
    Never even been asked if I take large amount of money out of the bank myself.
    Anonymous
    7th Apr 2018
    6:20am
    The mattress bank returns better than the majority of investment available to retirees, and is safer than most that yield higher returns. Sad state of affairs when the absolute WORST thing you can do when planning retirement is have assets above a quite low limit.

    You can have a multi-million dollar home, but otherwise unless you are very rich, you'd best plan to be quite poor, because the stinking government will make sure you become poor fairly soon if you are not poor at retirement. And it seems like well over half the retired population are selfish enough to think that's as it should be.
    Lescol
    6th Apr 2018
    2:32pm
    Thoughtful, for once I agree with you! The present rules are discriminatory and we will not be able to resolve the woes we'll face in a few years unless we change direction. A tax payable on income over the tax free threshold system is desperately needed if we are to avoid becoming a nation of slobs and being drip fed by c'link!

    The fed governments cannot be so fickle; planning for retirement takes decades. I personally believe the current mob need to be voted out and the replacements will follow them unless they begin to listen to the people including self funded retirees.

    cheers
    Knows-a-lot
    6th Apr 2018
    3:54pm
    Trust a government of Lieberal scumbags to treat the elderly unfairly.
    Anonymous
    7th Apr 2018
    6:15am
    And you think the ALP is less abusive? Dream on! They have just announced they will punish people for saving the government tens of thousands every year by stealing 30% of their income - NO MATTER HOW LOW THAT INCOME IT REALLY IS. But they will exempt PRIVILEGED PENSIONERS from their filthy act of theft, because they think the majority of unconscious who can't think past ''it's NOT FAIR for me to have less than him'' are stupid enough to vote for destroying the nation by forcing everyone onto welfare.

    Sadly, they are right. The majority of unconscious are dumb enough to vote for destruction, as long as it LOOKS LIKE someone they THINK is wealthier is being ripped off to fund more handouts.

    What is really, really said is that so many selfish people expect support to demand higher pensions and more rent assistance and exemption of the family home from the assets test, etc. but when someone they are jealous of because they saved a few quid is being dealt an unfair blow, the greedy green-eyes cheer. No concern for fairness, much less what's good for the nation. And certainly no interest in facts or truth, much less concern for the hurt some will suffer. As long as it's not you being attacked, it's all fine.
    GrayComputing
    6th Apr 2018
    4:05pm
    Dear PM MPs and senators

    It is time for you to take action for human decency and a huge stress reduction for pensioners

    NO ASSET TEST FOR A PENSION EVERV AGAIN!
    A pension is not welfare.

    For the retired and retiring people in your electorate do you think they really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules
    Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly,

    Do you or other MP like being part of the system that allows this indirect abuse of the elderly?

    This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

    Why do you as a compassionate person let this Centrelink abuse happen at taxpayers’ expense?

    You even stand to lose your chance at directing the government unless all these criminal asset tests for a pension are dropped now.

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    Rae
    6th Apr 2018
    4:30pm
    When Whitlam introduced a universal pension for the over 70s with no asset or income test we obviously thought it a bad idea because after the Elite staged that coup and dismissed him we voted him out and Fraser in. Fraser instantly stole the Welfare Fund and started the ball rolling to sell the country and all it's assets and resources off.

    Spilt milk and yes you just have to clean up the mess and figure out how to make it through until you can milk the cow again.

    A Leader will balls could just Nationalise but the Elite would wage war. Still be better for our Grandkids. I like Sally. She reminds me of the fire Gough had for insisting the people would share in the wealth of our Nation rather than foreign owners and foreign governments.

    That a Communist Dictatorship with a New Emperor owns a good deal of our infrastructure, mines, farms and properties is an appalling result of poor governance from Fraser onwards.
    GeorgeM
    6th Apr 2018
    7:50pm
    Quite right, GrayComputing, all need to maintain the rage from this bullying and attacks on retirees and vote them all out! Retirees don't need Centrelink in their lives, and Universal Pension can resolve that with massive savings (from reduced Centrelink admin) to the Budget.
    PlanB
    7th Apr 2018
    8:09am
    Deeming rates have been far too high for over 3 years now and there is NO way you are able to get the deeming rates on your savings -- I have written to the Government and rung and have never had a reply -- we also had a meeting in 2016 about such things and there were a LOT of people that were having their pensions cut because they were deemed to be getting a LOT more in interest than they were -- all I can say is every on to ring/write and email the federal minister

    https://www.mhs.gov.au/contact
    Bren
    7th Apr 2018
    2:54pm
    Since you only lose $1 of pension for each $2 that is deemed you really only need to earn half of 3.25% to break even i.e. 1.625%. Anything on top of that and you are ahead.

    For example if you have $250,000 in financial assets (and for simplicity assuming the deeming rate of 3.25% for every dollar - instead of just the ones above $50200) then you are deemed to have earned $312.50 but your pension only drops by $187.50 so you are $187.50 better off if you can get 3.25% on your investments/savings.

    To break even you need only earn 1.625% on your $250000 = $187.50 to offset your reduced pension.
    PlanB
    7th Apr 2018
    3:48pm
    Bren, I still reckon it is very unfair to have the deeming rate so darn high when we have NO chance of getting anywhere near that
    Lescol
    7th Apr 2018
    4:21pm
    Bren,

    There is an offical redeeming rate that needs to be quanifible. It ain't and so it's little more than a mockery!

    Vote the current bastards out and the replacements will quickly follow unless they correct this crappy matter. The time to 'take prisoners has passed' I figure.

    cheers
    Nan Norma
    7th Apr 2018
    7:11pm
    Ben, Where can I get 3.25% ?????
    Cowboy Jim
    8th Apr 2018
    10:43am
    Of course we can all get higher rates, advertised daily in the papers and down below in fine print it says - The investor can lose part or all of his/her investments as this is not a bank deposit.
    Who in his right mind and our time of life would invest in anything like that? If the deeming rate is calculated out of these offerings the Govt should think again.
    Bren
    8th Apr 2018
    12:06pm
    Sorry my calculator (or me) must have stuffed up - a half of $312.50 is of course only $156.25 not $187.50 as I stated.

    Nan Norma, I don' know where to get 3.25% where the capital is guaranteed (eg; a bank) but over the long term a super income stream should grow at a considerably higher rate than 3.25%.

    Anyway, my point was that Centrelink don't take dollar for dollar off your OAP for each deemed dollar you earn - they reduce your pension by half of the deemed amount i.e. 50 cents in the dollar. So you will break even if you can get half of 3.25% = 1.625% which you should easily be able to exceed with certain bank accounts.
    Anonymous
    11th Apr 2018
    6:58am
    And it's good policy to send a message to people that saving is futile because you only ''break even'' after going without lifestyle to save? I don't think so. I think it's as idiotic as punishing people for accruing some assets to give them security in old age. We need to encourage and reward endeavour and smart lifestyle choices if we are to ever restore prosperity for the society as a whole, rather than just for the elite.


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