Why deeming rate is 3.25 per cent

In a bid to reduce the amount of Age Pension that it pays, 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 rates have been set at these levels based on information the Government collects about how money markets are performing and the potential returns available to savers and investors.

Once the deeming rate has been applied to your finances, the calculated figure is taken into account to work out the amount of Age Pension, if any, that you are entitled to receive.

The financial assets to which deeming is applied include savings accounts, term deposits, managed investments, loans, debentures, listed shares and securities, as well as some income streams and some gifts you make.

The calculated deemed interest is then added to your income and assessed under the income test to work out how much financial support you need.

According to the Human Services Department, the benefits of deeming are to:

  • help keep your payments steady instead of going up and down based on the performance of your financial assets
  • provide an incentive to invest smartly, as any interest rate achieved above the deeming rates doesn’t count as income
  • allow you to choose the best investments for your needs, not how they may affect your payment.


If you happen to earn more interest than the Government deems, the extra amount is not counted as income.

Under some circumstances, recipients may be able to seek an exemption from the deeming rules. If you would like to know if  you qualify for an exemption, call the Government’s Financial Information Service on weekdays between 8am and 5pm on 136 357.

Are you earning the interest on your financial assets that the Government assumes?

Related articles:

Should deeming be adjusted?
Deeming rates confusion
Shares and deeming rates

YourLifeChoices Writers
YourLifeChoices Writershttp://www.yourlifechoices.com.au/
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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